Quick Take

A combination of timing pressures and unresolved policy concerns led Coinbase to withdraw its support for sweeping cryptocurrency legislation under consideration in the Senate.

On Wednesday, Coinbase CEO Brian Armstrong said the massive crypto exchange could not support the bill. 

His concerns stemmed from four main areas — the treatment of tokenized equities, DeFi issues, provisions that he said would "kill rewards on stablecoins," and the role of the Securities and Exchange Commission. 

There was not one specific issue that caused the exchange to pull support. The decision to pull support for the bill was not made lightly, a source familiar told The Block on Wednesday night. Concerns were catalyzed when the bill text was released on Monday night. 

On Monday, the Senate Banking Committee released updated bill text spanning more than 270 pages. Amendments, or changes, to the bill were due on Tuesday afternoon, and over 70 were filed ahead of the planned markup on Thursday. 

There were whole sections of the bill that were seen for the first time, the person said, and they came with problems, including a new section focused on illicit finance. It was also not clear that concerns would be addressed, and a conclusion was made that the bill was not in the best interest of its customers.

More time would have been beneficial, the person said, adding that it would have allowed for more discussions with members of the Senate Banking Committee. 

Later on Wednesday night, Senate Banking Committee Chair Tim Scott announced that the markup had been postponed.  

"I've spoken with leaders across the crypto industry, the financial sector, and my Democratic and Republican colleagues, and everyone remains at the table working in good faith," Scott said in a statement, adding that the goal is to get clear rules to the finish line.

Ahead of the markup, the necessary votes were reportedly nonexistent. 

Democratic Sen. Ruben Gallego, a key negotiator on the bill, told reporters he was scheduled to meet with Patrick Witt, the executive director of the President's Council of Advisors for Digital Assets, but Witt did not attend. Gallego added that, as of now, he could not support the bill.

As for next steps, the person familiar said it's time to get back to work and said that issues at hand are fixable, but need to be figured out before the next committee markup. The expectation is not to get to an 100% on the bill, but it has to be good enough, the person said. 

After Armstrong's post on Wednesday, crypto groups and firms voiced support for the Senate Banking Committee's bill. 

"We are at the table and will continue to move forward with fair debate," said Ripple CEO Brad Garlinghouse later on Wednesday in a post on X. "I remain optimistic that issues can be resolved through the mark-up process."