Brian Armstrong, CEO of Coinbase, has criticized Senate Democrats’ controversial proposal to regulate the DeFi sector, which has reportedly stalled bipartisan talks on the long-awaited crypto market structure legislation.
Coinbase CEO Slams Democrats’ Proposal
In a Friday X post, Coinbase’s CEO warned that the crypto industry “absolutely won’t accept” the Senate Democrats’ proposal on DeFi regulation as it “would set innovation back, and prevent the US from becoming the crypto capital of the world.”
For context, crypto journalist Eleanor Terret reported that Senate Democrats and Republicans were allegedly quarreling behind the scenes over a leaked proposal to regulate DeFi platforms in the upper chamber’s version of the crypto market structure bill, the Responsible Financial Innovation Act (RFIA).
The six-page document, named “Preventing illicit finance and regulatory arbitrage through decentralized finance platforms,” proposed establishing a “clear” regulatory framework for DeFi platforms by “defining accountability, clarifying oversight, and preventing the misuse of decentralized protocols for illicit finance, sanctions evasion, or to bypass market guardrails.”
Democrats' leaked proposal to regulate DeFi platforms. Source: Crypto In America
Jake Chervinsky, Variant CLO, called Democrats’ proposal “deeply unserious,” affirming that the drafted suggestions are “basically a crypto ban,” with many “fundamentally broken and unworkable” aspects.
The lawyer argued that the changes to RIFA’s draft text would effectively kill the bill, as it would make everyone in crypto an intermediary, force front-end providers to apply Know Your Customer (KYC) rules to their users, and give agencies “unchecked power for selective regulation.”
“It lets Treasury regulate anyone with ‘sufficient influence’ in a DeFi protocol and also lets Treasury define ‘sufficient influence’ however it pleases,” Chervinsky explained. “It creates a ‘restricted list’ for protocols and front-ends that Treasury thinks are too risky, and then makes it a crime for anyone to use them. There is no limiting principle, defense, or recourse. Treasury is all-powerful.”
“The RFIA draft got a few key things right,” he stated, a sentiment shared by other industry leaders like Uniswap’s CEO, Hayden Adams. Variant’s CLO highlights that the Senate Banking Committee’s draft protects software developers from unjust regulation and criminal prosecution, “preventing future administrations from returning to the era of Gary Gensler. Without this, there is no bill.”
Crypto Market Structure Bill At Risk?
Coinbase CEO affirmed that legislation is a process and pledged to continue fighting for the rights of investors and developers and to “preserve economic freedom.” He also added that Coinbase leadership is “committed to engaging and helping Congress get it right.”
Amid the backlash, some have debated whether the market structure bill can arrive at President Donald Trump’s desk before the end of the year. Eleanor Terret reported for Crypto In America that Senate Republicans are “frustrated” that Democrats have allegedly offered “little substantive feedback” on the two published discussion drafts on the legislation and have been reluctant to set an official date for the legislation’s markup session.
A Senate Banking Committee Communications Director, Jeff Naft, said that “What was sent to Republicans was not a legislative offer; the document was not written in legislative text, included multiple incoherent policy ideas, and was not a good-faith effort to engage on market structure.” As a result, negotiations have reportedly stalled.
However, anonymous sources told Terret that the leaked proposal was “meant as a starting point for discussions, not a final position,” and Democrats are seemingly frustrated that the document was made public.
Jacques Petit, Director of Communications for Senator Ruben Gallego, stated that “Their demand to set a markup date before text is agreed to is like setting a wedding date before the first date. It’s nonsensical.”
Terret noted that the longer this incident drags on, the more likely the crypto legislation won’t arrive at the President’s desk this year. If it spills over to 2026, it risks losing momentum, as Congress shifts its main focus from digital assets regulation to the midterm elections.
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