Coinbase CEO Blasts Senate DeFi Proposal, Warns of Innovation Setback

Coinbase CEO Brian Armstrong has strongly criticized a controversial proposal by Senate Democrats to regulate the decentralized finance (DeFi) sector, warning that the crypto industry “absolutely won’t accept” it. This proposal has reportedly stalled bipartisan negotiations on the long-awaited crypto market structure legislation, the Responsible Financial Innovation Act (RFIA).

The six-page document, titled “Preventing illicit finance and regulatory arbitrage through decentralized finance platforms,” aims to establish a “clear” regulatory framework for DeFi by defining accountability, clarifying oversight, and preventing illicit activities like sanctions evasion. However, critics, including Variant CLO Jake Chervinsky, have labeled it “deeply unserious” and “basically a crypto ban,” asserting it contains “fundamentally broken and unworkable” aspects that would stifle innovation and prevent the US from becoming a global crypto leader.

Chervinsky detailed the proposal’s risks, explaining it would effectively make everyone in crypto an intermediary, force front-end providers to implement Know Your Customer (KYC) rules, and grant the Treasury Department “unchecked power.” Specifically, the Treasury could define “sufficient influence” in a DeFi protocol, create a “restricted list” for platforms deemed too risky, and criminalize their use, leaving “no limiting principle, defense, or recourse.” This overreach, critics argue, would kill the broader RFIA bill, which otherwise offered crucial protections for software developers from unjust regulation, preventing a return to a restrictive regulatory environment.

Negotiations have reportedly stalled, with Senate Republicans expressing frustration over a lack of substantive feedback from Democrats, who, in turn, view the leaked proposal as merely a starting point for discussion. The ongoing dispute jeopardizes the passage of comprehensive crypto legislation this year, risking its momentum if it extends into 2026 amid upcoming elections.

(Source: https://bitcoinist.com/coinbase-ceo-crypto-democrats-crackdown-defi/)