coindesk.com
Coinbase’s (COIN) decision to walk away from the U.S. Senate's crypto market structure bill could spell the end of any meaningful legislation this Congress, according to financial policy analyst Jaret Seiberg of TD Cowen.
“We see this as potentially derailing market structure legislation in this Congress,” Seiberg wrote in a note to clients on Wednesday. He said the move is often a sign that backers believe a bill is no longer fixable through negotiation. “We view delay as negative for crypto and positive for banks,” Seiberg added.
Coinbase is one of the companies that has been involved in shaping the legislation aimed at clarifying how cryptocurrencies and exchanges should be regulated in the U.S. But Armstrong said the latest draft — released Monday night — had “too many issues” for the company to support.
Shares of Coinbase (COIN) tumbled about 2% in post-market trading on Wednesday following Armstrong’s announcement.
However, Coinbase's support may not be as significant, given that the bill might not have enough support from lawmakers to advance as-is.
Two individuals following the negotiations told CoinDesk that the committee did not have the votes, regardless of whether Coinbase supported or opposed the bill, to advance it. Even a party-line vote, where all of the committee's Republican members vote for, and the Democratic members vote against, seemed unlikely due to concerns from members of both parties.
Meanwhile, Senator Cynthia Lummis told Bloomberg, right after the Coinbase announcement, that the Senate Banking Committee may postpone its hearing on the crypto market structure, slated for Thursday.
Senator Ruben Gallego, one of the leading Democrats on the committee working on market structure legislation, said earlier Wednesday that he would have to vote "no" on the bill after White House crypto adviser Patrick Witt did not show up to a planned meeting to discuss ethics concerns. He told reporters he needed "a verbal agreement" and a "game plan" on how ethics might get added to the overall bill.
'Unfortunate outcome'
The industry reaction was marked by frustration and concern.
“It is an unfortunate outcome for the industry and Americans,” said Owen Lau, senior analyst at State Street. “The bill could lead to a worse outcome than the status quo.” While he noted the crypto sector has continued to grow despite years of regulatory limbo, Lau said the uncertainty could persist even longer now. “I think the door is still open for negotiations,” he added.
At the heart of the debate is whether the bill, intended to establish a formal structure for crypto market oversight, will benefit or harm an industry that has long operated in a gray area. Critics argue that certain aspects of the bill risk establishing a framework that favors incumbent financial institutions over crypto-native firms.
Dante Disparte, chief strategy officer at stablecoin issuer Circle (CRCL), warned against letting bipartisan talks fall apart. “A durable financial law that is in the national interest requires bipartisan support,” he said, pointing to the GENIUS Act — another crypto-related bill — as a model. “The opportunity to do with market structure what was done with GENIUS will be missed if negotiations and bipartisanship break down.”
Despite the backlash, some on Capitol Hill are still pushing to keep the process alive. But with Coinbase — one of the largest and most influential U.S. crypto firms — backing away, the bill’s momentum has slowed.
Industry support
Despite Coinbase's pullback, several industry leaders, including competitor exchanges Kraken, have shown their support for the bill.
“I and @KrakenFX remain fully committed to supporting Chairman @SenatorTimScott and Subcommittee Chair @CynthiaMLummis’s efforts to advance the market structure bill,” Kraken co-CEO Arjun Sethi wrote in a post on X.
“It has taken many years of sustained bipartisan work to get to this point across administrations [and] market cycles.”
Meanwhile, Chris Dixon, managing partner of prominent venture capital firm a16z Crypto, also posted on X saying that this bill will "protect decentralization, support developers, and give entrepreneurs a fair shot."
"It’s [the bill] not perfect, and changes are needed before it becomes law. But now is the time to move the CLARITY Act forward if we want the U.S. to remain the best place in the world to build the future of crypto," he said in the post.
One of the top U.S. crypto lobbying organizations, the Digital Chamber, also issued a statement suggesting it's still on board with the Senate's process as the bill is revised.
"Regardless of the outcome of tomorrow’s markup, we will continue engaging at every step of the process to help shape a final bill that works for our members, innovators, and U.S. consumers."
Another prominent U.S. CEO, Ripple's Brad Garlinghouse, posted praise for the bill on X, calling it "a massive step forward in providing workable frameworks for crypto, while continuing to protect consumers. Ripple (and I) know firsthand that clarity beats chaos, and this bill’s success is crypto’s success."
Read more: Coinbase pulls support from crypto market structure bill