Sweeping Crypto Legislation Hits Major Snag as Senate Banking Committee Postpones Markup

The Senate Banking Committee has postponed its markup hearing on sweeping crypto legislation following Coinbase's withdrawal of support. The bill, aimed at clarifying regulatory jurisdiction between the CFTC and SEC, had been set for a markup on January 15. Coinbase CEO Brian Armstrong cited concerns over stablecoin yields, tokenized equities, and decentralized finance in his decision to oppose the current version of the bill.

The move comes after key figures in the crypto industry and political negotiations began to express reservations. Democratic Sen. Ruben Gallego, a key negotiator, said he could not vote for the bill due to unmet commitments from the President's Council of Advisors for Digital Assets. The Senate Banking Committee's chair, Tim Scott, emphasized ongoing bipartisan negotiations and the goal of protecting consumers and strengthening national security.

Legislative uncertainty remains high. The Senate Agriculture Committee is now poised to hold its own markup at the end of January. Both bills will need to be reconciled before a full Senate vote can occur.

Why Did This Happen?

Coinbase's withdrawal of support is seen as a significant setback for the Senate's legislative efforts. The company's CEO, Brian Armstrong, stated that the bill as written would be 'materially worse than the current status quo'. His concerns include restrictions on stablecoin rewards, potential erosion of CFTC authority, and perceived risks to user privacy.

Stablecoin rewards have been a major point of contention. The bill's proposed restrictions could impact Coinbase's business model, which includes offering users incentives tied to stablecoin holdings. The company has previously warned lawmakers that it might reconsider its support for the bill if stablecoin rewards are limited.

What Are Analysts Watching Next?

Analysts are closely watching how the Senate Banking Committee will respond to the growing concerns. Coinbase's withdrawal may prompt last-minute amendments or negotiations before the markup. The Senate Agriculture Committee's version of the bill, which has not yet been marked up, may offer a different approach, particularly on issues like DeFi and AML.

Industry stakeholders remain divided. Some, like Ripple CEO Brad Garlinghouse and Digital Chamber CEO Cody Carbone, have expressed optimism that the bill can be improved through further negotiation. Others, including Coinbase, have taken a harder stance, suggesting that the current version of the bill is not worth supporting.

The outcome of these legislative efforts will have major implications for the U.S. crypto industry. A finalized bill could either provide much-needed clarity or introduce new restrictions that push innovation overseas. Market participants are waiting to see whether the Senate Banking Committee will adjust the bill before proceeding with its markup.