TLDRs:
- Coinbase CEO withdraws support for Senate crypto bill, citing overreach.
- Market reacts positively as stock rises 1.3% after Armstrong’s announcement.
- Stablecoin rules and DeFi restrictions drive industry debate and tensions.
- Senate Banking Committee meets Thursday to consider bill amendments.
Coinbase CEO Brian Armstrong surprised investors late Wednesday by formally withdrawing the company’s backing for the latest Senate draft of the CLARITY Act.
Armstrong described the bill as flawed, highlighting “too many issues” that he believes could hinder the growth and innovation of the crypto sector. The announcement came just ahead of a critical markup session scheduled for Thursday by the Senate Banking Committee.
The proposed legislation aims to overhaul U.S. cryptocurrency regulation after years of disputes over jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). However, Armstrong and other crypto leaders argue that the draft grants excessive authority to the SEC while imposing restrictive rules on emerging sectors such as decentralized finance (DeFi) and tokenized equities.
Market Reacts to Regulatory Rift
Investors responded positively to Armstrong’s move, pushing Coinbase shares up roughly 1.3% in after-hours trading, with the stock closing near $255.86. Analysts suggest the market interpreted the announcement as a clear signal that Coinbase is defending its operational flexibility and opposing rules that could stifle innovation in the digital asset space.
While the company’s action drew support from parts of the crypto industry, reactions remain divided. Ripple CEO Brad Garlinghouse hailed the bill as a “massive step forward,” signaling that some players see value in a more structured regulatory framework. Conversely, Alex Thorn of Galaxy Research cautioned that the draft could dramatically increase financial surveillance, potentially limiting the sector’s autonomy.
Stablecoins and DeFi in the Spotlight
One of the key sticking points of the legislation involves stablecoin regulation. The bill proposes limiting interest payments solely for holding stablecoins while allowing rewards for transactional activity, such as payments or loyalty programs. Crypto firms argue that restricting these incentives could reduce competitiveness, while bank lobbyists insist that unchecked stablecoin rewards might drain insured bank deposits.
Decentralized finance also remains a flashpoint. Armstrong criticized provisions that he said function as a de facto ban on DeFi activities, which allow users to trade, borrow, and lend without a centralized intermediary. The debate underscores a broader clash between traditional banking interests and emerging crypto platforms striving for innovative financial services.
Senate Markup Approaches
The Senate Banking Committee is set to hold an executive session on Thursday, 15 January, at 10:00 a.m. in the Dirksen Senate Office Building. The session will examine potential amendments and seek compromise on contentious points, including SEC authority, stablecoin rewards, and DeFi activities. Meanwhile, a parallel draft is being developed in the Senate Agriculture Committee, suggesting that lawmakers are exploring multiple avenues to modernize crypto oversight.
Industry groups are already mobilizing ahead of the vote. Blockchain Association CEO Summer Mersinger accused large banks of applying relentless pressure to eliminate stablecoin rewards, warning such measures would “choke off consumer choice.” Meanwhile, companies like Polygon are accelerating efforts to build payments infrastructure that relies on stablecoins, signaling the industry’s determination to maintain transactional innovation despite regulatory uncertainty.
Coinbase’s decisive stance, combined with active Senate scrutiny, sets the stage for a pivotal moment in U.S. cryptocurrency regulation. The coming days will be closely watched by investors, policymakers, and the broader crypto ecosystem.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
