Why Coinbase and Other Crypto Companies Turned Against the Senate’s Major Crypto Bill
By Nikhilesh De | Edited by Jesse Hamilton, Aoyon Ashraf
Published January 18, 2026
In a dramatic turn of events late Wednesday evening, Coinbase, one of the largest cryptocurrency exchanges in the United States, withdrew its support for a major Senate Banking Committee bill designed to provide a comprehensive regulatory framework for the crypto market. This sudden decision sent shockwaves through the cryptocurrency industry and contributed to the last-minute cancellation of a highly anticipated Senate hearing on the bill, which was scheduled to begin the following day.
The bill aimed to establish clear jurisdictional roles for federal regulators such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over digital assets. However, Coinbase’s withdrawal revealed deep divisions within the industry and significant concerns about several key provisions.
Why Coinbase Withdrew Support
Coinbase had been actively involved in the drafting and lobbying process for the crypto legislation, investing millions in advocacy efforts. Yet, just hours before the scheduled hearing, the company announced its opposition. CEO Brian Armstrong expressed that the bill’s final text included elements that conflicted with the interests and operational realities of crypto businesses.
Following Coinbase’s announcement, the Senate Banking Committee canceled the hearing with less than 12 hours’ notice, citing the need for further deliberation. Over the weekend, lawmakers and industry representatives resumed discussions to address the contentious issues.
Industry Concerns: A Breakdown
CoinDesk spoke with six industry insiders throughout the week to better understand the concerns around the bill. The unanimous theme was that several provisions risked stifling innovation, complicating compliance, and undermining the ethos of decentralization which the blockchain community values.
1. Decentralized Finance (DeFi) Regulations
Perhaps the most surprising and controversial element was the sudden inclusion of rules targeting decentralized finance platforms. These provisions were not present in earlier drafts and appeared unexpectedly when the bill text was published just before midnight on Monday.
The new rules sought to extend anti-money laundering (AML) and know-your-customer (KYC) requirements to DeFi applications. This effectively would force centralized entities to take compliance responsibility for inherently decentralized platforms, a move critics say could "kill" truly decentralized projects.
“It should be possible to build decentralized systems that maintain compliance without forcing them to be permissioned and centralized,” said one source. The bill also empowered the U.S. Treasury Department to impose sanctions restricting how self-hosted wallets interact with exchanges—a move that raised privacy and access concerns.
Summer Mersinger, CEO of the Blockchain Association, called the language "broad" and warned that it could sweep in core parts of DeFi infrastructure under heavy regulatory scrutiny from both the SEC and Treasury.
2. Stablecoin Yield Restrictions
The bill’s provisions on stablecoins—cryptocurrencies pegged to stable assets like the U.S. dollar—were especially contentious. The banking industry secured prohibitions preventing crypto platforms from directly offering “yield” or interest on stablecoin deposits except through certain limited activities, like transaction rewards or staking.
Many in crypto viewed these restrictions as overly harsh, arguing they discourage innovation and user benefits. Allegedly, amendments proposed by some senators might have intensified these limitations, potentially eliminating the ability of crypto firms to offer any yield on stablecoin holdings.
This issue sparked a broader debate over how stablecoins should be regulated in comparison to traditional bank deposits, which are backed by Federal Deposit Insurance Corporation (FDIC) protections and subject to intense oversight.
3. Securities and Token Regulations
The bill reaffirmed the SEC’s authority over tokens defined as securities—essentially those whose value relies on the managerial or entrepreneurial efforts of others. Projects launching tokens would face stringent disclosure and registration requirements, with the SEC as the primary arbiter.
While some proponents believe this clarity helps protect investors, critics argued that the broad reach of such definitions could hinder startups and innovation. Coinbase CEO Brian Armstrong suggested the bill would effectively "ban" tokenized equities, significantly curtailing market development in this area.
Conversely, representatives from the tokenization sector like Superstate and Uniform Labs maintained that the bill’s treatment of tokenized securities simply aligns with existing SEC securities law and is not unduly restrictive.
Additional complaints centered on vague definitions such as “common control” of distributed ledger systems and limitations on the flexibility of regulators (both SEC and CFTC) to adapt their approaches for digital assets.
Other Major Issues
Beyond the core concerns, the bill was also criticized for its fast-tracked legislative timeline. The full text was released late Monday with proposed amendments due within 17 hours, and the hearing was scheduled just 58 hours after the publication of the bill text. Industry representatives said this rush inhibited thorough review and considered feedback.
Senator Angela Alsobrooks proposed an amendment calling for rulemakings and studies on deposit outflows, alongside strict anti-evasion regulations imposing strong penalties—even for minor infractions—which many viewed as excessively punitive.
On the political side, lawmakers expressed concerns across the aisle about ensuring bipartisan leadership for the new federal regulatory bodies and about provisions aiming to limit former President Donald Trump’s ability to profit from cryptocurrency activities.
Industry Divisions and Next Steps
Not all parts of the crypto industry opposed the bill. Several executives and organizations voiced support for the framework, viewing it as an important step toward regulatory clarity and mainstream acceptance of digital assets.
Nevertheless, Coinbase’s opposition and the last-minute cancellation of the hearing underscore the complexity and controversial nature of crypto regulation in the U.S.
Lawmakers have since resumed negotiations and calls with industry stakeholders, signaling ongoing efforts to refine and possibly reshape the bill. The next few weeks could prove critical for the future of crypto regulation, innovation, and market structure in America.
For continuous updates on the crypto regulatory landscape, stay tuned to CoinDesk.