Coinbase, a leading cryptocurrency exchange in the United States, has decided to retract its backing for the proposed Digital Asset Market Clarity Act. CEO Brian Armstrong voiced significant concerns, suggesting that the current draft could be detrimental to the crypto industry, stating, "We’d rather have no bill than a bad bill. Hopefully, we can all get to a better draft."
Armstrong's decision came after a thorough review of the Senate Banking Committee's draft over the past two days. In a post on X, he outlined several issues, including what he perceives as a "de facto ban" on tokenized equities and extensive limitations on decentralized finance. He argues that the legislation would grant the government excessive access to financial records, posing severe privacy risks for consumers.
Furthermore, Armstrong highlighted that the proposed draft diminishes the role of the Commodity Futures Trading Commission (CFTC) and significantly increases the authority of the U.S. Securities and Exchange Commission (SEC). This shift is particularly concerning for the crypto community, given the SEC’s aggressive regulatory stance under the current administration.
Armstrong also echoed industry fears that the bill could adversely affect stablecoin rewards and appears designed to protect banks from competition. Banking lobbyists have warned that providing users with around 5% risk-free returns on stablecoins might lead to a "deposit flight," causing a substantial withdrawal from low-interest bank accounts.
The community remains divided on the issue. ETF analyst James Seyffart responded to Armstrong’s concerns, stating that the industry is in dire need of a coherent market structure bill. Despite the controversy, Armstrong remains optimistic about reaching a favorable resolution, a sentiment shared by other key figures in the industry. Ripple CEO Brad Garlinghouse expressed hope that the issues could be ironed out during the markup process.
Garlinghouse described the bill as a "massive step forward" in creating a functional framework for the crypto sector while safeguarding consumers, emphasizing that the success of the bill is crucial for the future of cryptocurrency.
The Senate Committee on Agriculture, Nutrition, and Forestry will conduct a markup hearing on January 27, following the release of the legislative text on January 21. Earlier this week, SEC Chair Paul Atkins indicated a positive outlook on the possibility of the bill being signed into law within the year.
As this situation unfolds, the crypto community continues to watch closely, hoping for legislation that supports innovation without stifling growth.