WASHINGTON—The Senate Banking Committee on Wednesday postponed a planned discussion of draft legislation that would establish a regulatory framework for cryptocurrencies, hours after Coinbase CEO Brian Armstrong publicly opposed the bill, according to Reuters.
The legislation, unveiled Monday, would define when crypto tokens are treated as securities or commodities and would give the Commodity Futures Trading Commission authority over spot crypto markets. The markup had been scheduled for Thursday.
Committee Chairman Tim Scott said lawmakers and industry stakeholders remain engaged despite the delay. “Everyone remains at the table working in good faith,” Scott said in a statement announcing the postponement.
Reuters noted that earlier Wednesday, Armstrong said on X that Coinbase could not support the bill in its current form, arguing it had “too many issues,” including what he described as a de facto ban on tokenized equities, an erosion of CFTC authority, and draft provisions that would “kill rewards on stablecoins.”
Without Coinbase’s backing, it is unclear whether the markup can move forward. The company has been a major stakeholder in the negotiations and donated millions of dollars to political action committees backing pro-crypto candidates in 2024, Reuters said.
Kian Sarreshteh, CEO of InvestiFi, a fintech that has worked with credit unions on crypto since 2023, said that Armstrong and the crypto lobby are strongly advocating for their ability to pay what they call "interest" on stablecoins.
"Credit union and bank politics aside, this is a consumer protection issue," stated Sarreshteh. "The yield these crypto exchanges pay on stablecoins oftentimes is generated through rehypothecation. Nobody seems to want to admit that counterparty risks with rehypothecation are real, and it is near impossible for the average user to ascertain the risk that comes with the yield crypto companies are looking to pay on stablecoin balances. Users just see interest rates that pay more than their credit union, and opt in without reading all the fine print.
"Lest we forget, Celsius, BlockFi and yes, FTX too, were all rehypothecating users' crypto holdings, promising strong yield, and now those users are lucky to recover pennies on the dollar in bankruptcy proceedings," continued Sarreshteh. "Nobody in the crypto lobby is talking about this, demonstrating a short-term memory of real risks their style of stablecoin yield poses. Our government needs to do the right thing, protect consumers, protect the the lifeblood of our economy in credit unions and community banks--and close this loophole.