Coinbase Withdraws Support For Crypto Bill Over Stablecoin Rewards Ban
In a dramatic turn that caught Washington off guard, Coinbase Global Inc. (NASDAQ:COIN) CEO Brian Armstrong pulled his company’s support for the Senate Banking Committee’s crypto market structure bill late Wednesday evening, less than 24 hours before lawmakers were set to vote on the legislation.
The withdrawal forced the committee to postpone Thursday’s markup indefinitely, dealing a significant blow to what many had hoped would be landmark legislation establishing regulatory clarity for digital assets in the United States. The revised markup is now scheduled for the final week of January, though industry observers are skeptical that the fundamental disputes can be resolved by then.
The Stablecoin Rewards Battle That Broke The Deal
At the heart of Armstrong’s objections lies a contentious provision that would effectively eliminate stablecoin rewards for users who simply hold these digital dollars in their accounts. The bill, released Monday night after months of closed-door negotiations, contains language that would prohibit crypto platforms from paying yield on idle stablecoin balances, a restriction that doesn’t apply to traditional banks offering interest on dollar deposits.
According to reports from Bloomberg and industry sources, this provision emerged from aggressive lobbying by Wall Street banks concerned that crypto companies offering attractive stablecoin yields could siphon deposits away from the traditional banking system. The restriction would allow rewards only when tied to specific activities like transactions, payments, or providing liquidity in decentralized finance protocols.
For Coinbase Global, which has made stablecoin products a cornerstone of its “Everything Exchange” strategy, the provision represents an existential threat dressed up as consumer protection. Armstrong didn’t mince words in his assessment, posting on X that the bill would allow traditional banks to “ban their competition” rather than compete on innovation.
The company’s stock has remained relatively stable despite the regulatory uncertainty, trading around $252 as of Wednesday’s close, though down from its July 2025 high of $444.
Beyond Stablecoins: Armstrong’s Other Red Lines
While stablecoin rewards dominated headlines, Armstrong’s withdrawal letter cited 3 additional deal-breakers that emerged from the 270-page bill released just days before the scheduled vote.
Tokenized Securities Ban: The legislation would effectively prohibit on-chain versions of stocks and other real-world assets, directly undermining Coinbase’s publicly stated plans to expand into tokenized equities trading in 2026. This collision between the bill’s restrictions and the company’s strategic roadmap made supporting the legislation untenable.
DeFi Surveillance Expansion: Armstrong warned that provisions related to decentralized finance would represent the most significant expansion of government financial surveillance power since the 2001 USA Patriot Act. The language could grant authorities unprecedented access to users’ transaction data under the guise of combating illicit finance, a characterization that …
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