Coinbase CEO Brian Armstrong criticized Senate Democrats’ controversial proposal to regulate the DeFi sector, which reportedly blocked bipartisan discussions on long-awaited crypto market structure legislation.
Coinbase CEO criticizes Democrats’ proposal
In a post on Friday
For context, crypto journalist Eleanor Terret reported that Senate Democrats and Republicans reportedly argued behind the scenes over a leaked proposal to regulate DeFi platforms in the upper house’s version of the crypto market structure bill, the Responsible Financial Innovation Act (RFIA).
The six-page document, titled “Preventing illicit financing and regulatory arbitrage through decentralized finance platforms,” proposes establishing a “clear” regulatory framework for DeFi platforms by “defining accountability, clarifying oversight, and preventing the misuse of decentralized protocols for illicit financing, sanctions evasion, or to circumvent market guardrails.”
Democrats' leaked proposal to regulate DeFi platforms. Source: Crypto In America
Jake Chervinsky, Variant CLO, called the Democrats’ proposal “deeply unserious,” saying the drafted suggestions are “basically a ban on crypto,” with many aspects “fundamentally broken and unworkable.”
The lawyer argued that the changes to the draft RIFA text would effectively kill the bill because they would make everyone in crypto a middleman, force front-end providers to enforce Know Your Customer (KYC) rules on their users, and give agencies “unchecked power for selective regulation.”
“This allows Treasury to regulate anyone with “sufficient influence” in a DeFi protocol and also allows Treasury to define “sufficient influence” as it sees fit,” Chervinsky explained. “This creates a ‘short list’ for protocols and front-ends that Treasury considers too risky, then criminalizes their use. There is no limiting principle, defense or remedy. Treasury is all-powerful.”
“The RFIA project fixed some key points,” he said, a sentiment shared by other industry leaders like Uniswap CEO Hayden Adams. Variant’s CLO points out that the Senate Banking Committee’s plan protects software developers from unfair regulation and criminal prosecution, “preventing future administrations from returning to the era of Gary Gensler. Without it, there will be no bill.”
Is the Crypto Market Structure Bill Under Threat?
The Coinbase CEO said the legislation is a process and pledged to continue fighting for the rights of investors and developers and “preserving economic freedom.” He also added that Coinbase executives are “committed to engaging and helping Congress get it right.”
Amid the backlash, some are wondering whether the market structure bill could make it to 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 reportedly offered “little substantive comment” on the two released discussion drafts of the legislation and have been reluctant to set an official date for the legislation’s markup session.
Jeff Naft, communications director for the Senate Banking Committee, said that “what was sent to Republicans was not a legislative offer; the document was not drafted into legislation, included multiple inconsistent policy ideas, and was not a good faith effort to engage on market structure. » As a result, negotiations would be at a standstill.
However, anonymous sources told Terret that the leaked proposal was “intended as a starting point for discussions, not a final position,” and Democrats appear frustrated that the document was made public.
Jacques Petit, communications director for Senator Ruben Gallego, said that “their request to set a markup date before the text is accepted is tantamount to setting a wedding date before the first date. It’s absurd.”
Terret noted that the longer this incident continues, the more likely it is that crypto legislation will not make it to the president’s desk this year. If this drags out into 2026, it risks losing momentum, as Congress shifts its primary focus from regulating digital assets to the midterm elections.
Bitcoin (BTC) trades at $121,754 in the one-week chart. Source: BTCUSDT on TradingView
Featured image from Unsplash.com, chart from TradingView.com
Editorial process as Bitcoinist focuses on providing thoroughly researched, accurate and unbiased content. We follow strict sourcing standards and every page undergoes careful review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance and value of our content to our readers.
