Why Coinbase and Other Crypto Companies Withdrew Support from the Major Crypto Bill
By Nikhilesh De | Edited by Jesse Hamilton, Aoyon Ashraf
Published January 18, 2026, 2:00 p.m. ET | Updated January 18, 2026, 5:50 p.m. ET
As the U.S. Senate Banking Committee prepared to hold a key hearing on a comprehensive crypto market structure bill, one of the industry’s largest players, Coinbase, suddenly withdrew its backing. This unexpected move sent shockwaves across the crypto industry and led to the committee canceling the hearing just hours before it was set to begin. The bill, designed to clarify federal regulators’ roles—specifically the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)—in overseeing cryptocurrency markets, has sparked widespread debate among industry participants.
Here’s an in-depth look at why Coinbase and several other companies soured on the legislation and what concerns underlie their opposition.
A Rush to Digest a Complex Bill
The legislation was released just before midnight on a Monday, giving companies less than a day (around 17 hours) to review the text before amendments were due by 5 p.m. the following day. The hearing was scheduled less than three days after the bill’s release. This tight timeframe left many participants scrambling to fully understand the sweeping new rules.
The compressed schedule was one factor in the pushback, as companies argued it prevented meaningful engagement or adjustments before the bill’s markup process.
Key Areas of Industry Concern
1. Decentralized Finance (DeFi) Provisions
One of the most unsettling surprises for many was the inclusion of new provisions specifically targeting decentralized finance. These rules, which were not in earlier drafts or consultations, would expand the Bank Secrecy Act (BSA) to DeFi projects and impose stringent anti-money laundering (AML) and know-your-customer (KYC) requirements.
Industry insiders say this approach threatens to undermine the decentralized nature of such platforms by forcing centralized intermediaries to handle compliance obligations—potentially making true decentralization impossible. For example, the bill would empower the Treasury Department to impose sanctions limiting how self-hosted wallets interact with exchanges, raising fears about privacy and user autonomy.
The Blockchain Association’s CEO Summer Mersinger described these provisions as overly broad, sweeping “core DeFi infrastructure” into regulatory frameworks that are mismatched for open blockchain protocols.
2. Stablecoin Yield Restrictions
Stablecoins remain a critical component of the crypto ecosystem for liquidity and payments. However, the bill introduces stringent limits on how platforms can offer yield—or interest—on stablecoin deposits. These restrictions largely favor traditional banks and their insured deposits, which must follow rigorous disclosure and oversight, but may place crypto companies at a disadvantage.
While some loopholes allow yield through staking or user activity, the banking lobby secured provisions aimed at restricting the direct offering of interest-like rewards on stablecoins. Amendments under consideration could tighten these rules further, threatening business models in the rising decentralized finance and crypto lending sectors.
3. Securities and Exchange Commission Oversight
The bill gives the SEC broad authority over many digital assets by defining which tokens qualify as securities. Essentially, any token reliant on “entrepreneurial or managerial efforts” could be classified as a security, requiring extensive disclosures and restricting sales.
Critics say this would force every project launching a token to seek SEC approval, effectively stifling innovation. Coinbase CEO Brian Armstrong argued that the bill would erode the CFTC’s authority and place too much power with the SEC, limiting regulatory flexibility.
Provisions could also lead to what Armstrong describes as a “de facto ban” on tokenized equities—digital representations of stock that many crypto companies are developing. However, representatives of the tokenization sector disagree, suggesting the bill simply brings tokenized securities under traditional SEC jurisdiction without overly burdensome additional restrictions.
Additional Industry Concerns
Amendments proposed by lawmakers could have introduced even more restrictive measures. For instance, a significant amendment sponsored by Senator Angela Alsobrooks called for new rulemakings, studies on deposit outflows, and anti-evasion regulations—actions viewed by some as potentially prohibitive for the industry.
Industry Split on the Bill
Despite Coinbase’s withdrawal, the crypto industry is not united in opposition. Several other firms and organizations expressed support for the bill and the markup hearing, emphasizing the need for regulatory clarity.
Nonetheless, Coinbase’s public opposition, coupled with the concerns raised by other insiders, highlighted the difficulties lawmakers face in crafting legislation that balances innovation with consumer protection and market integrity.
Next Steps
Following the hearing cancellation, lawmakers relaunched their negotiations. On Friday, Democrats and committee staff held calls with industry representatives to continue the dialogue. The future of the bill remains uncertain, as both regulators and industry participants seek a workable compromise.
In Conclusion
The Senate Banking Committee’s crypto bill represents a critical attempt at regulating a fast-evolving industry. However, Coinbase’s abrupt withdrawal of support and widespread industry concerns underscore the complexities involved in legislating decentralized and innovative technologies. The ongoing discussions will be pivotal in determining how the U.S. shapes the future of cryptocurrency oversight, balancing regulatory safeguards with the need for technological advancement.
This article is based on insights from multiple crypto industry participants and sources familiar with the Senate Banking Committee’s legislative process.