Senate nixes vote on crypto bill after Coinbase pulls its support
The US Senate was expected to vote Thursday on a landmark crypto legislation bill, but Senate Banking Committee Chair Tim Scott decided to delay the highly anticipated vote after crypto giant Coinbase (COIN) pulled its support for it.
Coinbase CEO Brian Armstrong said in a post on X late Wednesday that after "reviewing the Senate Banking draft text over the last 48hrs, Coinbase unfortunately can’t support the bill as written."
Armstrong said that there were "too many issues" with the draft of the bill as written, but pointed to four main objections, including "amendments that would kill rewards on stablecoins, allowing banks to ban their competition."
Stablecoin rewards have become the most controversial issue in the run-up to the crypto legislation debate.
Bank lobbyists have been pushing lawmakers to ban what they call a "loophole" that crypto companies are exploiting in the GENIUS Act's stablecoin law.
Because the GENIUS Act prohibits stablecoin issuers from offering interest on the assets, crypto companies are instead offering investors “rewards” on their stablecoin holdings.
Coinbase itself offers its customers 4.10% rewards for holding Circle Internet Group’s (CRCL) USDC stablecoin.
But the banking sector has fought to end this practice of offering rewards, with lobbying groups like the Bank Policy Institute calling it an “interest loophole” that the crypto industry is attempting to use to get around the prohibition in the legislation.
More than 100 community bank leaders from across the US, who are members of the American Bankers Association (ABA) Community Bankers Council, recently sent a letter to the Senate, calling on Congress to disallow the practice of offering rewards.
But the crypto industry has pushed back against Wall Street, arguing that the banks are trying to squelch competition.
In a post on X in September, Coinbase said that if credit card rewards aren’t banned, then crypto rewards shouldn’t be banned either. The company launched a website called nomorebailouts.org as part of its campaign.
“Banks want to ban rewards to maintain their monopoly, and we're making sure the Senate knows bailing out the big banks at the expense of the American consumer is not ok,” Armstrong said in a post on X at the time.
Armstrong remains 'optimistic' about crypto bill
In addition to banning stablecoin rewards, Armstrong said on Wednesday that the bill would create a “de facto ban on tokenized equities,” as well as DeFi prohibitions that would be “giving the government unlimited access to your financial records and removing your right to privacy.”
The Senate’s draft gives the US Commodity Futures Trading Commission (CFTC) regulatory authority over spot crypto markets, rather than the Securities and Exchange Commission (SEC).
Although the crypto industry has long preferred the CFTC to have that authority over the SEC, Armstrong said that the bill will lead to the "erosion of the CFTC’s authority, stifling innovation and making it subservient to the SEC."
"We appreciate all the hard work by members of the Senate to reach a bi-partisan outcome, but this version would be materially worse than the current status quo," Armstrong added. "We’d rather have no bill than a bad bill. Hopefully we can all get to a better draft."
It is not clear what happens now with the bill, or when Scott will bring the legislation, known as the Clarity Act, back up for a vote.
“I’ve spoken with leaders across the crypto industry, the financial sector, and my Democratic and Republican colleagues, and everyone remains at the table working in good faith,” he said in a statement.
Despite his criticism of the draft, Armstrong said in a separate post on X on Wednesday that he is "actually quite optimistic that we will get to the right outcome with continued effort."