Coinbase Rejects Senate Crypto Bill Over Privacy and DeFi Concerns

Key Highlights

• Coinbase rejects Senate crypto bill, citing privacy risks, DeFi limits, and unfair rules favoring banks over innovation.
• New rules could make DeFi developers get government approval, turning open systems into permissioned ones.
• Coinbase plans an “everything exchange” in 2026, using stablecoins and Base tools to simplify blockchain for all users.

Cryptocurrency exchange Coinbase has officially withdrawn its support for the Senate Banking Committee’s draft of the long-anticipated digital asset market structure bill. CEO Brian Armstrong cited major issues, including a de facto ban on tokenized equities, restrictive DeFi rules, and erosion of the Commodity Futures Trading Commission’s (CFTC) authority.

“We’d rather have no bill than a bad bill,” Armstrong said on X, emphasizing the risks to privacy and innovation. The move prompted the Senate to pause its markup session, leaving the bill’s timeline uncertain.

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The draft bill has circulated informally, offering the first clear picture of federal intentions to regulate digital assets. Despite being incomplete, the document already reveals critical compromises and contentious provisions. Among them, stablecoin incentives face sharp restrictions. 

Users can earn rewards only through active engagement—staking, providing liquidity, or governance participation—rather than simply holding balances. This aligns with banks’ arguments that passive yield resembles unregulated deposits, giving traditional financial institutions a significant regulatory advantage.

DeFi and privacy under threat

Industry experts warn the bill could stifle decentralized finance (DeFi). Armstrong highlighted that the draft “gives the government unlimited access to your financial records and removes your right to privacy.” 

Commentator Aaron Day slammed the bill, calling it a surveillance framework. He said it would force exchanges to monitor every trade, register everyone involved, and hand over full transaction histories. Day also warned that DeFi developers would face new, strict registration rules, which could block the creation of truly open financial systems. “Building permissionless systems now requires permission,” he said, showing how the bill could seriously hurt crypto innovation.

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Moreover, the draft assigns expansive powers to regulators. The CFTC would be subordinated to the Securities and Exchange Commission (SEC), while exchanges and token issuers must submit source code, tokenomics, and transaction history for review. Day described this as a “digital prison” disguised as regulatory clarity. Critics say it prioritizes large institutions like Coinbase, BlackRock, and Wall Street, while limiting smaller players and open-source projects.

Coinbase’s strategic expansion

On the other hand, Coinbase has its own ambitious plan for 2026. Armstrong intends to build a new ‘everything exchange,’ which combines cryptocurrencies, stocks, commodities, and prediction markets. In association with Kalshi, the exchange is going to add prediction markets to their services. As a result, it will face competition from Gemini and Crypto.com.

Stablecoins have been viewed as integral to Coinbase’s future. Armstrong stressed their use outside of trading, citing blockchain-based tools for settlements facilitating faster transactions than banks. Furthermore, Coinbase’s Base Network and Base App aim to bring more users and developers onto the blockchain, making it easier for everyone to use blockchain apps.

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