Why Coinbase Just Walked Away from the Biggest Crypto Bill in Years

TLDR

• Coinbase CEO Brian Armstrong pulled support for the CLARITY Act market structure bill, citing issues with tokenized equities bans, DeFi restrictions, and privacy concerns
• The withdrawal may derail the legislation this Congress, with analyst Jaret Seiberg calling it negative for crypto and positive for banks
• Competing exchanges Kraken and venture capital firm a16z Crypto continue supporting the bill despite its flaws
• Senate Banking Committee postponed Thursday’s hearing on the bill after lacking sufficient votes to advance it
• Bitcoin remains stable above $96,000 as markets price in outcomes before regulatory debates conclude

The crypto industry faces internal division after Coinbase withdrew its support for a major market structure bill moving through the U.S. Senate. CEO Brian Armstrong announced Wednesday that the company cannot back the CLARITY Act in its current form.

Armstrong cited multiple concerns with the draft legislation. The bill includes what he called a “defacto ban on tokenized equities” and prohibitions on decentralized finance. He also raised issues about government access to financial records and privacy protections.

The Coinbase chief said the bill would erode the Commodity Futures Trading Commission’s authority while making it subordinate to the Securities and Exchange Commission. Draft amendments could eliminate rewards on stablecoins, he added.

Industry Reaction Splits

Financial analyst Jaret Seiberg of TD Cowen said the withdrawal could end meaningful legislation this Congress. He called the delay negative for crypto companies and positive for traditional banks.

Coinbase shares dropped about 2% in after-hours trading following the announcement. The Senate Banking Committee postponed its Thursday hearing on the bill.

Two sources told CoinDesk the committee lacked votes to advance the bill regardless of Coinbase’s position. A party-line vote appeared unlikely due to concerns from both Republican and Democratic members.

Senator Ruben Gallego said he would vote no after White House crypto adviser Patrick Witt missed a planned meeting on ethics concerns. Gallego needed a verbal agreement on adding ethics provisions to the bill.

Competing Exchanges Back Bill

Kraken co-CEO Arjun Sethi expressed continued support for the legislation. He said it took years of bipartisan work across administrations and market cycles to reach this point.

Chris Dixon, managing partner at a16z Crypto, also backed the bill. He said Republicans, Democrats, and the Trump Administration worked with industry members to protect decentralization and support developers.

Ripple CEO Brad Garlinghouse called the bill a major step forward. He said it provides workable frameworks while protecting consumers.

Technical Concerns

Crypto lawyer Jake Chervinsky flagged the same issues as Armstrong. He said opportunities exist at markup and on the Senate floor to improve the bill.

Bitwise Invest’s head of research Ryan Rasmussen said the current draft was bad for tokenization, stablecoins, DeFi, privacy, builders, users, investors and innovation. Venture capitalist Tim Draper agreed with Armstrong’s assessment.

Peter Van Valkenburgh, executive director of Coin Center, remained optimistic about the current draft. The Digital Chamber, a top U.S. crypto lobbying group, said it would continue engaging to shape a final bill.

Market Impact

OKX Singapore CEO Gracie Lin said Bitcoin’s rally shows markets often price outcomes before policy debates conclude. She cited renewed ETF demand, improving liquidity, and optimism about the bill bringing a more stable framework.

Bitcoin topped $97,600 in late Wednesday trading. The cryptocurrency was trading around $96,350 at time of reporting.

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