Coinbase CEO "Strongly Opposes DeFi Regulation Draft"…Urges U.S. Congress to Reconsider

When the U.S. Democratic Party released a stringent draft regulating decentralized finance (DeFi), the industry pushed back in unison. Brian Armstrong, CEO of Coinbase, strongly criticized the proposal, saying, "This proposal will roll back innovation and block the opportunity for the United States to grow into the 'cryptocurrency capital.'"

On the 10th (local time), Armstrong wrote on his X (formerly Twitter), "We can never accept this bill," adding, "This is not simply a bad proposal but a measure that undermines economic freedom." He also said, "Legislation is a consultative process, and Coinbase will actively cooperate so that Congress can amend it in the right direction."

Earlier that day, political outlet Politico reported that a draft written by Democratic senators would require any individual or company that directly interacts with users during DeFi operations to register with the U.S. Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). In effect, it would classify virtually all DeFi operators as brokers and regulate them.

The industry has strongly opposed the draft, calling it "effectively a DeFi ban." Jake Chervinsky, general counsel at Variant, criticized, "This draft makes most participants in the crypto market subject to regulation," adding, "It is closer to a set of demands to undermine the bill than a starting point for negotiation."

Summer Mersinger, head of the Blockchain Association, also warned, "This draft is effectively at a level that would ban DeFi, wallet development, and open-source applications in the United States," and cautioned, "Its requirements are impossible to comply with and will ultimately drive responsible developers overseas."

The draft also included provisions granting the Treasury Department and the U.S. Federal Reserve (the Fed) the authority to identify "entities that can be held responsible for DeFi activities." Individuals and organizations that generate revenue or are involved in operation or distribution were specified as subject to regulation, while pure protocols with no profit motive are reportedly exempt if they are "sufficiently decentralized."