US crypto bill stalls after Coinbase pulls support

A major US crypto regulation bill appears to be in jeopardy after Coinbase withdrew its backing and Senate Banking Committee Chair Tim Scott postponed a key vote, as reported by several media outlets. While the setback has rattled crypto equities, lawmakers and industry leaders insist the legislative fight is far from over.

The Senate Banking Committee was scheduled to vote 15 January (Thursday) on the Digital Asset Market Clarity Act, a sweeping proposal intended to establish clearer rules for cryptocurrency markets. The committee had released a draft of the legislation earlier last week, raising hopes for progress on long-awaited crypto market structure reform.

Those plans unraveled on 14 January (Wednesday) when Coinbase abruptly pulled its support for the bill, prompting Sen. Scott, a South Carolina Republican, to delay the vote. The move followed growing controversy around provisions that would effectively ban most stablecoin rewards, or interest payments, offered by crypto platforms.

Stablecoin rewards at the centre of the dispute

Coinbase CEO Brian Armstrong said the company could not support the current draft, citing several concerns in a post on X, including what he described as a “de facto ban” on tokenized stocks and restrictions on decentralized finance. However, the prohibition on stablecoin rewards is widely viewed as the core issue.

Crypto exchanges such as Coinbase argue they should be allowed to pay customers a yield for holding stablecoins on their platforms. Banks strongly oppose that idea, warning it could siphon deposits from the traditional banking system.

As reported by Barron’s, community banks, in particular, have raised alarms. Last month, the Independent Community Bankers of America estimated that allowing interest on stablecoin holdings could reduce community bank deposits by $1.3 trillion and cut lending by $850 billion. Unlike major banks, smaller institutions often lack the scale to issue their own stablecoins.

Under the draft legislation, interest payments would be banned for stablecoins simply held on trading platforms, but rewards could still be earned when the assets are actively used, such as through staking, selling, or posting them as collateral.

What comes next for crypto legislation

With the Senate now entering recess, any Banking Committee vote is unlikely before February. TD Cowen analyst Jaret Seiberg wrote in a research note that the delay benefits banks, as the crypto bill could have served as a legislative vehicle for unrelated measures, including a proposed 10 percent cap on credit-card interest rates recently endorsed by former President Donald Trump.

Still, momentum for crypto regulation has not completely stalled. The Senate Agriculture Committee is advancing separate legislation that would govern crypto “commodities” such as Bitcoin. A committee vote on that bill remains scheduled for later this month.

Recently, US lawmakers submitted more than 75 amendments to the crypto market structure bill ahead of a Senate Banking Committee hearing. The proposals cover issues ranging from stablecoin rules to ethics standards for public officials, according to a document obtained by CoinDesk.

In another recent development, the US Office of the Comptroller of the Currency (OCC) announced that national banks may now act as intermediaries in cryptocurrency transactions. This decision marks a change in how the financial system engages with digital assets. For years, banks maintained a cautious stance towards crypto. The new guidance permits regulated institutions to facilitate crypto trades under established compliance standards, signalling a shift in the relationship between traditional finance and digital currencies.