- Coinbase pulled support after reviewing final text, triggering Senate Banking to cancel the markup and restart negotiations.
- Surprise DeFi AML and KYC provisions, plus rushed review timelines, alarmed lawmakers and industry participants.
- Stablecoin yield limits and expanded SEC authority split the industry, delaying consensus on market structure rules.
U.S. lawmakers were preparing to debate a major crypto market structure bill this week when events abruptly shifted. Late Tuesday night, Coinbase withdrew support from the legislation after reviewing its final text. By Wednesday evening, the Senate Banking Committee canceled the hearing scheduled for Thursday morning, restarting negotiations days later.
Coinbase Exit Triggers Last-Minute Reset
Coinbase played a central role in negotiations and spent millions lobbying for the bill. However, the company said it could not support the released text. Shortly after Coinbase’s announcement, the Senate Banking Committee canceled the markup hearing.
Notably, lawmakers and industry representatives resumed discussions on Friday. Democrats and staffers held calls with crypto groups to address unresolved issues. Coinbase was not alone, as several participants raised concerns after reviewing the final language.
DeFi Rules and Review Timeline Raise Alarm
Industry participants said new provisions targeting decentralized finance surprised many stakeholders. These DeFi rules were not included in earlier drafts or circulated beforehand. They proposed applying anti-money laundering and know-your-customer rules to DeFi platforms.
However, critics said the approach could force centralized entities to operate supposedly decentralized systems. Another concern involved the Treasury Department’s authority over self-hosted wallets interacting with exchanges. Blockchain Association CEO Summer Mersinger warned the bill could sweep core DeFi infrastructure into existing regulatory regimes.
Additionally, timing intensified the backlash. Lawmakers released the bill text just before midnight Monday. Amendments were due by 5:00 p.m. Tuesday, giving roughly 17 hours for review. The planned Thursday hearing allowed only 58 hours to analyze the proposal.
Stablecoin Yields and Securities Oversight Disputes
Stablecoin provisions also divided the industry. The bill limited yield rewards unless tied to activity like transactions or staking. While some saw loopholes, others viewed the restrictions as severe. Proposed amendments could have tightened them further.
Meanwhile, the bill expanded SEC authority over tokens linked to managerial efforts. Coinbase CEO Brian Armstrong said it weakened the CFTC and limited regulatory flexibility. He also warned of a de facto ban on tokenized equities.
However, tokenization firms including Securitize and Dinari disagreed, saying the bill treated tokenized securities like traditional assets. Despite ongoing talks, the hearing remains unscheduled as negotiations continue.
