Senate Committee Delays Crypto Bill Markup Following Coinbase’s Withdrawal

Coinbase

Summary:
The Senate Banking Committee's efforts to establish clear regulations for cryptocurrency faced a setback as it postponed a planned markup of a significant market structure bill after Coinbase CEO Brian Armstrong withdrew the company’s support for the draft.

Key Takeaways:

The Senate Banking Committee has postponed its markup of a crypto market structure bill.
Coinbase's CEO publicly retracted support for the draft bill, raising concerns over its provisions.
The bill aims to clarify the classification of crypto tokens and would place oversight of spot markets under the CFTC.
The delay prolongs the uncertainty surrounding a unified regulatory framework for the cryptocurrency industry.

Delayed Markup Amid Ongoing Negotiations

The Senate Banking Committee's initiative to create clearer guidelines for the cryptocurrency sector has encountered an obstacle. The committee decided to put off the markup of a vital market structure bill only hours after Coinbase CEO Brian Armstrong announced that the company could no longer support the latest draft.

Chairman Tim Scott stated late Wednesday that the markup would be deferred while bipartisan negotiations are still in progress but did not provide a new date for a rescheduled session.

The postponement followed Armstrong's public withdrawal of support for the draft bill, which aims to clarify how crypto tokens are categorized and to assign oversight of the spot market to the Commodity Futures Trading Commission (CFTC). Armstrong expressed concern, saying, “After reviewing the Senate Banking draft text over the last 48 hours, Coinbase unfortunately can’t support the bill as written.”

Ongoing Dialogue Despite Industry Concerns

Coinbase's objections emerged in the midst of a vigorous lobbying battle regarding stablecoin rewards. Banks are urging legislators to prevent cryptocurrency platforms from offering yield-like incentives that resemble interest on deposits.

The banking sector contends that Congress has already established this boundary through the GENIUS Act, which prohibits stablecoin issuers from paying interest or rewards solely for holding a payment stablecoin. The industry argues that the market structure bill should address what they view as an avoidance of restrictions through exchange rewards.

Chairman Scott indicated that he has been in discussions with various stakeholders, hinting that negotiations are still active. He noted, “This bill reflects months of serious bipartisan negotiations and real input from innovators, investors, and law enforcement. The objective is to provide definitive rules that protect consumers, bolster our national security, and secure the future of finance in the United States.”

Prolonged Wait for a Clear Cryptocurrency Framework

The current draft of the bill would limit the ability to pay interest solely for holding a stablecoin while still permitting rewards linked to activities like payments or loyalty programs. The SEC and CFTC are expected to establish the required disclosure rules regarding these incentives.

The committee had planned to convene for the bill's markup on Thursday at 10 AM ET, but the delay postpones the industry’s hopes for a legislative framework that could replace years of inconsistent enforcement with a cohesive regulatory approach.

Additionally, the Senate’s overall schedule concerning cryptocurrency is already in flux. Senate Agriculture Committee Chairman John Boozman has also postponed his panel's markup, pushing it further into January, stating that lawmakers need additional time to finalize crucial policy elements and garner widespread support.