Crypto Bill Stalls as Coinbase Withdraws Support, Cites Bank Lobbying

A major cryptocurrency regulatory bill collapsed in the U.S. Senate after Coinbase withdrew its support, triggering a postponed Banking Committee vote. CEO Brian Armstrong called the current draft worse than no regulation at all, citing concerns over stablecoin rewards and expanded SEC authority.

The Digital Asset Market Clarity Act faced opposition from multiple fronts before the scheduled markup. Armstrong said crypto companies should be allowed to compete and offer loans just like banks

⚡ JUST IN: COINBASE CEO BRIAN ARMSTRONG SAYS "CRYPTO COMPANIES SHOULD BE ALLOWED TO COMPETE AND OFFER LOANS JUST LIKE BANKS". pic.twitter.com/v3mDQUVM33

— Coinwaft (@coinwaft) January 16, 2026

Banking Chair Tim Scott formally called off the hearing hours after Armstrong’s public opposition. The vote has been postponed to an unannounced date, with Senator Cynthia Lummis suggesting February or March as possible timelines.

“I feel like I got run over by a Mack truck,” Lummis told CNBC. She has championed similar crypto legislation for years on Capitol Hill.

Coinbase Stablecoin Rewards Emerge as Central Battleground

The core dispute centers on whether crypto platforms can offer rewards to stablecoin holders. Under the proposed law, exchanges cannot pay direct interest but may offer reward programs functioning similarly.

Banks argue this distinction creates an unfair advantage for crypto companies. The American Bankers Association led a petition signed by over 3,000 banks warning of severe consequences.

The petition claimed allowing interest-like rewards “will siphon trillions from local lending.” Banks fear reduced capital for car loans, mortgages, agricultural financing, and small business borrowing.

A Federal Reserve report suggested potential credit squeezes ranging from hundreds of billions to $1.2 trillion. This projection alarmed traditional financial institutions monitoring stablecoin growth.

Armstrong pushed back against these concerns, calling for equal treatment across industries. “Crypto companies should be allowed to compete and offer loans just like banks,” he said.

Coinbase’s chief policy officer Faryar Shirzad accused banking lobbyists of protecting incumbency. He emphasized consumer protection as the company’s primary focus in ongoing negotiations.

Regulatory Authority Split Fuels Industry Concerns

Beyond stablecoin rewards, Armstrong flagged multiple provisions troubling the crypto sector. He described restrictions on tokenized equities as a “defacto ban” that would stifle innovation.

The bill’s treatment of decentralized finance drew particular criticism. Armstrong warned the draft grants government “unlimited access” to financial records, raising privacy concerns.

After reviewing the Senate Banking draft text over the last 48hrs, Coinbase unfortunately can’t support the bill as written.

There are too many issues, including:

– A defacto ban on tokenized equities
– DeFi prohibitions, giving the government unlimited access to your financial…

— Brian Armstrong (@brian_armstrong) January 14, 2026

Power distribution between regulators emerged as another flashpoint. The proposal shifts authority away from the CFTC toward the SEC, alarming industry participants.

The SEC’s “regulation by enforcement” approach under previous leadership left lasting scars. Many crypto executives prefer CFTC oversight, viewing it as more innovation-friendly.

ETF analyst James Seyffart expressed disappointment at the setback. “This industry needs a market structure bill,” he commented on Armstrong’s post.

Not what we wanna see/hear with regard to CLARITY (to say the least)

This industry needs a market structure bill. https://t.co/z22ot1rdOD

— James Seyffart (@JSeyff) January 14, 2026

Armstrong had previously warned against reopening the GENIUS Act, calling it a “red line.” That law bars stablecoin issuers from paying direct interest while permitting third-party rewards.

He predicted banks would eventually reverse their position on stablecoin yields. “They’ll be lobbying FOR the ability to pay interest in a few years,” Armstrong wrote.

Armstrong indicated willingness to engage directly with bank CEOs on disputed provisions. He hopes a revised draft can return to markup within weeks.

The bill’s latest version dropped late Monday, giving stakeholders limited review time. Coinbase identified concerns too late for amendments before the scheduled markup.

Lummis committed to resuming negotiations after the congressional break. “We’ll find some ways to fix the bill,” she promised despite visible frustration.

The crypto industry has sought regulatory clarity for years, making the setback particularly painful. Market participants continue watching Washington for signals on the legislation’s future.