Coinbase CEO Warns Big Banks Are Trying to 'Kill Competition' with New Crypto Bill Draft

Coinbase, a major cryptocurrency exchange, has pulled its support for the latest version of the crypto market structure bill known as the CLARITY Act, raising alarms about its implications for competition in the crypto space. Coinbase CEO Brian Armstrong criticized the pressure from traditional banks, stating that they might be using regulatory mechanisms to limit competition. The ongoing debate centers on issues that could significantly impact both crypto firms and consumers.

Key Takeaways

Coinbase has retracted its support for the CLARITY Act due to concerns over competition with traditional banks.
CEO Brian Armstrong highlighted the risk of banks using regulatory means to stifle competition.
The bill may introduce restrictions on decentralized finance (DeFi) and affect stablecoin holders’ reward payments.
Armstrong expressed hope that legislators can resolve the current conflicts within the market.

Coinbase

Coinbase CEO’s Concerns Over Fair Competition

Recently, Coinbase CEO Brian Armstrong shared his reasons for withdrawing support for the CLARITY Act during a segment on FOX Business. He expressed frustration that banks might manipulate regulations to eliminate competition. Armstrong stated, “It just felt deeply unfair to me that one industry [banks] would come in and get to do regulatory capture to ban their competition.” He emphasized the need for a fair competitive landscape and argued that powerful financial players should not interfere with the market.

Armstrong highlighted that his concerns reflect the views of many in the crypto industry, noting his responsibility to advocate for customers who he believes are being negatively impacted by the proposed legislation. He maintained, “I declined to opine on the exact—whether the hearing, the markup should happen or not… But I did feel like I had to speak up on behalf of our customers and all Americans here.”

Debate Intensifies Over CLARITY Act

The ongoing discussion about the CLARITY Act has revealed significant disagreements between banks and cryptocurrency firms, particularly regarding stablecoin holders and their eligibility for reward payments. Armstrong has already raised red flags about the legislation potentially banning tokenized equities, imposing restrictions on decentralized finance (DeFi), and increasing government access to financial data, which could threaten individual privacy.

In addition, he cautioned that the bill may shift regulatory authority from the Commodity Futures Trading Commission (CFTC) to the Securities and Exchange Commission (SEC), which could hinder competition in the cryptocurrency market.

Armstrong Critiques Banking Lobbying Strategies

Armstrong pointed out the irony in the situation, noting that while banks benefit from cryptocurrency, their lobbying efforts appear focused on limiting competition. “Many of these banks are actually very smart,” he remarked, referring to the way traditional finance is increasingly working with crypto. He mentioned, “They’re actually doing deals with Coinbase. We’re powering a lot of crypto and stablecoin infrastructure for them on the commercial side.”

Despite his criticism of the banking sector's lobbying tactics, Armstrong remains hopeful that lawmakers can iron out the contentious issues within the crypto market structure bill:

“And then their lobbying arm comes to D.C. and thinks of it as very zero-sum and is trying to kill the competition. So, I suspect, like many things, if we get the principles in the room, we can actually get this figured out and make a good deal.”

Coinbase
The daily chart shows COIN’s retracement since the bill’s markup delay. Source: COIN on TradingView.com

Featured image from DALL-E, chart from TradingView.com