Bitcoin has staged a robust rebound, surging to a two-month high of $97,500, bringing it within striking distance of breaching the pivotal $100,000 threshold. This price surge coincides with the U.S. Senate Banking Committee's preparation for a crucial vote on a cryptocurrency market structure bill, yet the legislation's fate is mired in uncertainty due to an intense tug-of-war between Wall Street banks and the crypto industry over the rights to stablecoin yields.
Just hours before the Senate Banking Committee was scheduled to deliberate on the bill on Thursday morning, Brian Armstrong, CEO of the largest U.S. cryptocurrency exchange Coinbase Global, Inc., abruptly announced on social media the withdrawal of his support for the legislation. Armstrong declared, "We would rather have no bill than a bad bill," citing several critical issues including restrictions on stablecoin rewards, tokenized stocks, and decentralized finance.
This stance deals a significant blow to the bill's prospects. The legislation was originally designed to clarify the regulatory division of labor between the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission over the crypto industry, seen as pivotal legislation for the sector's quest for legitimacy. However, disagreements between banking lobbyists and crypto companies over stablecoin yield payments, coupled with conflict-of-interest clauses for government officials demanded by Democrats, could potentially derail the bill during the committee vote. According to an anonymous cryptocurrency lobbyist speaking to Fortune magazine, "This bill could genuinely collapse at the committee stage. The mood within the industry is extremely tense right now."
The issue of rights to stablecoin yields has become the central point of contention. Banking lobbying groups argue that while the "Genius Act" passed last summer prohibited stablecoin issuers from directly offering yields to users, it left a loophole for rewards provided by partners and third parties. Rebecca Romero Rainey, President and CEO of the Independent Community Bankers of America, stated in an interview that the association is seeking a "comprehensive ban" applicable not only to stablecoin issuers but also extending to exchanges, third parties, and affiliated entities. The American Bankers Association has organized a petition with over 3,200 bankers, urging the Senate Banking Committee to "strengthen the existing ban and extend interest restrictions to digital asset exchanges, brokers, dealers, and other affiliated parties." The core argument from the banking sector is that allowing crypto companies to pay yield-like rewards on stablecoin reserves would lead to deposits flowing out of the banking system, forcing banks to cut lending and harming local economies. The Independent Community Bankers of America has even launched an advertising campaign targeting members of the Senate Banking Committee. The current draft of the market structure bill includes provisions prohibiting crypto companies from offering rewards linked to stablecoin holdings but exempts certain rewards from membership or incentive programs. A bipartisan group of senators proposed a compromise in the "Clarity Act," allowing crypto companies to provide yields for transactions involving stablecoins, similar to credit card reward mechanisms. However, this compromise has clearly failed to meet Coinbase's demands. The company reported stablecoin-related revenue of $355 million in the third quarter of 2025 and offers yields to holders of its USDC stablecoin. Armstrong criticized the draft amendments in a statement, arguing they "would stifle stablecoin rewards, allowing banks to eliminate competitors."
Beyond the stablecoin yield issue, Armstrong voiced strong opposition to other provisions in the bill. He warned that the proposal contains a "de facto ban" on tokenized stocks and includes DeFi restrictions that could grant the government "unlimited access" to users' financial records. Armstrong also criticized the draft for weakening the CFTC's authority, making it "subordinate" to the SEC, which he claims would stifle innovation. Maghnus Mareneck, CEO and Co-founder of Cosmos Labs, told The Defiant, "If Congress closes the current loophole, stablecoins that pay interest could be phased out. In the legislation, crypto exchanges might be less favored than banks, and privacy protocols will face greater pressure." An anonymous crypto lobbyist complained to Fortune that, in an effort to secure bipartisan support, the bill has "tilted left," including provisions for regulating DeFi, rules for crypto token listing processes, and oversight responsibilities handed to the SEC. "They've lost their North Star," the lobbyist said. Ron Hammond, Policy Lead at crypto trading firm Wintermute, commented, "This is still being negotiated. But this is the crypto space; there's always last-minute drama, so this seems to be one of those sticking points."
Another contentious issue pushed by Democrats involves adding clauses to prevent political figures from profiting from cryptocurrency holdings or interests. This matter has gained prominence due to the Trump family's deep ties to the crypto industry, including their digital asset platform World Liberty Financial's recent application for a federal banking charter. However, Republicans strongly oppose this possibility. Senate Banking Committee Chairman, Republican Senator Tim Scott of South Carolina, told CoinDesk on Wednesday that ethics provisions fall outside the scope of the "Clarity Act." In a letter to Scott and the committee's senior Democrat, Massachusetts Senator Elizabeth Warren, obtained by Fortune, several non-profit oversight groups described the lack of provisions addressing government conflicts of interest in the proposed bill as "deeply concerning." If Democrats like Arizona Senator Ruben Gallego, who view ethics clauses as a "red line," withdraw their support, the bill could stall in committee. The committee requires a simple majority to pass, although Republicans hold an advantage.
According to informed sources, the number of amendments expected to be debated on Thursday exceeds 100 and has been growing throughout the week. Republican Senator Thom Tillis of North Carolina and Democratic Senator Angela Alsobrooks of Maryland have been active on the stablecoin yield issue and are expected to propose related amendments. Jaret Seiberg, Managing Director at TD Cowen, stated in a research note, "We believe the deal is that platforms cannot pay rewards for holding stablecoins but can pay rewards for using stablecoins. This is similar to how banks offered rewards for using debit cards before the Durbin Amendment, even though checking accounts paid no interest." Gabe Rosenberg, a partner specializing in financial institutions at Davis Polk, remarked that the bill is "no longer an opening bid, but certainly an anchor point. But there are many opportunities. Tomorrow is really crucial for understanding the overall direction." The Senate Agriculture Committee already announced on January 13th a delay for its crypto market structure bill, planning to release text on January 21st and hold a deliberation hearing on January 27th. However, the Senate Banking Committee is still expected to proceed with Thursday's deliberations as scheduled. Peter Dugas, Managing Director at Regulatory Intelligence Group, noted, "The real question will be whether digital asset companies, not the banking industry, are satisfied with this. I think that's the biggest overall concern as time goes on."
For the crypto industry, following the successful passage of the stablecoin-focused "Genius Act" last summer, comprehensive market structure legislation is seen as key to granting legitimacy to this emerging sector. But after years of heated debate, the product emerging from the Senate might be worse than having no bill at all. Coinbase's withdrawal of support undoubtedly casts a shadow over the bill's prospects, which still has a long way to go to secure the strong bipartisan support needed for passage.
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