Coinbase pulled support for Senate crypto legislation — here’s what happened

Coinbase, one of the largest cryptocurrency exchanges in the United States, officially withdrew its support for a key piece of proposed Senate crypto legislation, citing concerns that the current draft contained provisions that could stifle innovation and overreach into the decentralized finance (DeFi) sector.

Initially, Coinbase was a proponent of the legislative effort, which was intended to establish comprehensive regulatory clarity for the digital asset industry, specifically stablecoins. The exchange, through its Chief Policy Officer, stated that a clear federal framework was essential for mainstream adoption and consumer protection.

However, the turning point came during recent revisions of the bill. According to statements released by Coinbase, the updated draft included language that broadened the definition of ‘digital asset intermediary’ far beyond custodial entities. The exchange argued this expanded scope could inadvertently classify non-custodial wallet providers, open-source software developers, and other purely decentralized infrastructure providers as financial institutions, subjecting them to onerous banking regulations and stringent compliance requirements originally intended only for centralized exchanges and stablecoin issuers.

Coinbase’s rationale for withdrawal centered on the principle of regulating intermediaries, not underlying technology. They warned that if the legislation passed in its current form, it would effectively push DeFi development and innovation overseas, undercutting the US’s competitive edge in Web3 technology. The withdrawal represents a significant setback for the bipartisan support the bill needed to advance through the Senate Banking Committee and underscores the deep divisions that remain over how to regulate decentralized protocols versus centralized exchanges.

Source: Coinbase pulled support for Senate crypto legislation — here’s what happened