What To Know:
- The Senate Banking Committee scrapped its January 15 crypto bill hearing after Coinbase pulled support, derailing plans to move the legislation forward.
- Proposed restrictions on stablecoin rewards split crypto firms and banks, with Coinbase citing risks to yields and platform incentives.
- Stablecoin rewards are a key income stream for Coinbase, with USDC-related revenue projected to hit $1.3 billion in 2025.
After Coinbase withdrew its support, the Senate Banking Committee on January 15 abruptly canceled a scheduled hearing on amendments to the long-awaited crypto market structure bill. This has caused a severe blow to the law especially as the lawmakers had hoped to move forward early this year.
Coinbase Pulls Back from Crypto Market Structure Hearing Support
The hearing had been set for Thursday morning and was expected to mark a critical step toward amending and voting on the legislation, often referred to as the Clarity Act. The bill seeks to draw clearer regulatory boundaries between the Commodity Futures Trading Commission and the Securities and Exchange Commission, outline when crypto assets fall under securities law or commodities oversight, and introduce new disclosure requirements for crypto firms operating in the US.
Committee aides have not said when, or if, the hearing will be rescheduled. What is clear is that momentum began to unfold within days of the bill text being released late Monday evening. Senators were given until late Tuesday night to submit changes, with leadership hoping to push the bill to a markup vote by Thursday. By Wednesday, that timeline had collapsed.
Senator Ruben Gallego, a Democrat who played a central role in negotiating the legislation, publicly distanced himself from the bill. Gallego told reporters he had planned to meet with Patrick Witt, the executive director of the President’s Digital Assets Advisory Council, to resolve outstanding concerns. Witt did not attend the meeting. As a result, Gallego said he could no longer support the bill in its current form.
Soon after, Coinbase confirmed it was withdrawing its backing. CEO Brian Armstrong said on X that the company had serious concerns about provisions tied to stablecoin yields, tokenized equities, and decentralized finance. Even as several crypto firms and advocacy groups reiterated their support and said they would keep pushing for passage in 2026.
The pullback, however, is not surprising. Coinbase had warned Senate negotiators weeks earlier that it would reconsider its support if lawmakers expanded restrictions on stablecoin rewards beyond enhanced disclosure rules. Those tensions aggravated ahead of the January 15 schedule, which Senate Banking Committee Chair Tim Scott had described as a firm deadline after months of missed targets throughout 2025.
The largest US crypto exchange was apparently concerned about language that could prevent platforms from offering incentives to customers who hold stablecoins. A Coinbase spokesperson pointed Bloomberg to comments Armstrong made in December, when he predicted that banks would eventually lobby in favor of stablecoin yield, even as they oppose it today.
Traditional banking groups too, have taken a hard line. They are pressing lawmakers to extend limits beyond the framework established under the GENIUS Act. The prohibition limits stablecoin issuers from paying direct interest but allows third-party platforms to provide rewards. One proposal under discussion would restrict such rewards to regulated financial institutions, a change backed by banking lobbyists who argue that yield-bearing stablecoin accounts could drain deposits away from community banks.
In a recent letter, the American Bankers Association warned that large-scale deposit outflows could weaken community bank lending. Small businesses, farmers, students, and homebuyers would bear the cost. The group added that crypto exchanges cannot replace FDIC-insured products or fill the lending gaps left behind.
Coinbase has sought to hedge against that outcome. The company has applied for a national trust charter, which could eventually allow it to offer rewards under a more restrictive regulatory rule. At the same time, crypto-native firms are urging lawmakers to retain platform-based incentives even for companies without banking licenses and argued that tighter rules would entrench incumbents and limit competition.
For Coinbase, the stakes are financial as well as political. Stablecoin rewards remain a meaningful revenue stream. The exchange shares interest income with Circle Internet Group from reserves backing the USDC stablecoin, and USDC balances held on Coinbase provide a steady source of income, especially during market downturns. Coinbase also holds a minority stake in Circle and currently offers users up to 3.5 percent in rewards on USDC balances through its Coinbase One program.
Market data suggests Coinbase’s stablecoin-related revenue could reach $1.3 billion in 2025. A ban on platform-based incentives would likely reduce customer holdings and cut into that revenue figure.
