On January 14, Coinbase CEO Brian Armstrong withdrew the exchange’s backing for the Senate’s Digital Asset Market Clarity Act, calling the current draft “materially worse than the current status quo.”
The withdrawal centers on provisions Armstrong says would chill tokenized assets, tighten controls on decentralized finance and effectively ban yield on stablecoins — changes he warned would harm innovation and business models across crypto.
The draft legislation raises concerns around tokenized equities, with Armstrong arguing that its language could amount to a de facto ban on this segment by making issuance and trading impractical. It also proposes tighter restrictions on DeFi, which critics warn could enable broad access to users’ financial data and undermine the core principle of decentralization that underpins these protocols.
In addition, provisions that would limit or prohibit rewards on stablecoins are seen as a direct threat to revenue models built around stablecoin incentives. From a broader regulatory perspective, the draft shifts oversight authority away from the CFTC toward an expanded role for the SEC, a move that many in the crypto industry interpret as signaling a more enforcement-driven and less innovation-friendly approach.
Armstrong summed up the stance bluntly: “We’d rather have no bill than a bad bill.” He framed the decision as protecting Coinbase’s strategic push to become an “everything app” and “everything exchange,” arguing the draft would constrain those ambitions.
Market and regulatory implications
The withdrawal has fractured what had been a fragile consensus. Some industry leaders praised the draft, while trade groups and bank lobbyists are pushing for tighter stablecoin rules. Democratic lawmakers raised separate ethics concerns, adding to the gridlock. Collectively, these forces turned a single-vote markup into a test of whether compromise is possible.
For market participants, the dispute matters beyond policymaking. Limits on tokenized equities and stablecoin yields would reshape product road maps for exchanges and custodians, alter revenue streams, and shift where innovation and liquidity concentrate. The bill’s tilt toward SEC authority could also change compliance costs and enforcement risk for derivatives and spot services.
Investors and treasury managers will now watch whether the postponed Senate Banking Committee markup can be reconciled through amendments; the outcome will determine regulatory boundaries for tokenized assets, DeFi privacy rules and stablecoin yields, and will shape how firms like Coinbase pursue multi‑asset trading and interest-bearing stablecoin products.
