Coinbase Warns Overregulation Could Stifle Onchain Innovation

Coinbase executives have likened key U.S. crypto legislation to "oil for the onchain economy," emphasizing its role in fostering growth and institutional adoption. During the Blockchain Futurist Conference, Chief Business Officer Shan Aggarwal and Interim Head of Business Development Scott Meadows argued that the GENIUS Act—establishing stablecoin rules—and the proposed market structure bill form an interconnected framework that could catalyze innovation. "GENIUS laid the foundation for stablecoins to grow," Aggarwal said, adding that increased stablecoin supply would "flow into onchain money market funds or treasuries," creating a "positive feedback loop" for the industry, according to a Cointelegraph report.

The executives' remarks come as Coinbase navigates a rapidly evolving regulatory landscape. The firm is in advanced talks to acquire stablecoin infrastructure startup BVNK for $2 billion, a move that would bolster its position in institutional stablecoin payments. BVNK, which has raised $90 million from investors including Citi Ventures and Visa, provides enterprise-grade solutions for merchants and financial institutions. The potential acquisition aligns with Coinbase's push to expand stablecoin operations, which contributed $246 million—20% of its third-quarter 2025 revenue, according to a Parameter report.

However, regulatory clarity remains a sticking point. Coinbase has urged the U.S. Treasury to narrowly interpret the GENIUS Act, warning against overreach that could stifle innovation. The firm argued that oversight should exclude non-financial software developers and blockchain validators, while exempting rewards programs from interest payment prohibitions. "Regulations must stick to the clear intent of the bill text," Chief Policy Officer Faryar Shirzad stated, stressing the need for U.S. stablecoins to maintain "versatility and competitiveness" against global rivals, according to a Crypto Economy article.

The company's stance reflects broader industry concerns. Despite the GENIUS Act's July passage, implementation hurdles persist. The U.S. Treasury's proposed rules face criticism for potentially imposing broader obligations than the law's original intent. Coinbase warned that excessive regulation could undermine the U.S.'s goal of leading the crypto sector, a sentiment echoed by DeFi platforms grappling with security challenges. For instance, decentralized finance protocol Balancer recently suffered a $116 million exploit, highlighting vulnerabilities in complex smart contract systems, as described in a FinanceFeeds report.

Meanwhile, institutional adoption of onchain finance is gaining momentum. Chainlink's collaboration with FTSE Russell to bring global indices onchain via DataLink has positioned the oracle network as a bridge between traditional and decentralized markets. By making data from the Russell 1000 and other benchmarks accessible across 50+ blockchains, the partnership aims to enable tokenized assets and next-generation financial products, according to a Yahoo Finance report. Similarly, the U.S. Department of Commerce's partnership with Chainlink to publish macroeconomic data onchain underscores the growing integration of real-world data into blockchain ecosystems, as noted in an Invezz article.

As lawmakers debate the Responsible Financial Innovation Act—a Senate version of the market structure bill—Coinbase CEO Brian Armstrong's recent Washington visit signaled ongoing efforts to secure bipartisan support. With approximately 90% consensus reportedly reached on the legislative framework, the industry awaits clarity on how stablecoins and market structures will shape the future of onchain finance.