Coinbase CEO Brian Armstrong Says US Won't Become 'Crypto Capital Of The World' If One Policy Proposal Passes
News Summary
Coinbase CEO Brian Armstrong has warned that a sweeping new proposal advanced by Senate Democrats is "a bad proposal" that would "set innovation back." The draft aims to classify decentralized finance (DeFi) operations, requiring firms or individuals providing front-end access to DeFi platforms to register with the SEC or CFTC as brokers. Industry lawyers and the Blockchain Association criticize the proposal, stating it would create broad liability and could force open-source developers and DeFi startups to register under complex securities rules, potentially leading to a "DeFi ban" in America. They warn this could drive the $1 trillion DeFi industry overseas. Simultaneously, major U.S. banks like Goldman Sachs, Citigroup, and UBS are quietly building blockchain-based settlement systems. Analysts caution that strict DeFi rules could slow American progress in digital asset innovation and potentially set the stage for a two-tier financial system where Wall Street captures permissioned blockchains, and DeFi innovation migrates offshore, locking out American retail and startups from the next trillion-dollar wave.
Background
The debate surrounding crypto market structure in the U.S. has intensified in 2025, reflecting deep divisions among regulators and lawmakers on how to govern digital assets. While the House has already passed its Digital Asset Market Clarity Act, Senate Democrats and Republicans remain divided over how to allocate oversight between the SEC and CFTC, causing discussions to stall. Concurrently, the Treasury Department has been given power to define when a protocol or entity "exercises control or sufficient influence" over a decentralized platform, adding uncertainty to the scope of future regulation. This regulatory impasse and the new proposal form the backdrop against which industry leaders express concerns about the U.S.'s leadership in the global crypto space.
In-Depth AI Insights
What are the true underlying motivations behind this proposal, and how might it conflict with the Trump administration's pro-business stance? - While ostensibly aimed at consumer protection and preventing illicit activities, the harsh language of the proposal suggests a deeper motive to entrench traditional financial institutions' control over the financial system. - This stringent, Democrat-led regulatory push seems incongruous with a Trump administration that champions innovation and aims to reduce regulatory burdens. It could be perceived as hindering digital economic growth, potentially prompting an internal administration re-evaluation of its crypto stance, especially concerning US global competitiveness. - The proposal might reflect concerns from traditional finance lobbying groups about DeFi's disruptive potential, seeking to slow or limit its growth through regulatory barriers, thereby buying time for existing players to adapt or integrate relevant technologies. How does the divergence between proposed US regulatory restrictions and Wall Street's internal blockchain development signal a potential future financial architecture? - This divergence signals the emergence of a two-tiered financial system: a heavily regulated, institutional-facing permissioned blockchain landscape dominated by Wall Street, and a decentralized, permissionless DeFi ecosystem forced offshore. - Such a scenario would forfeit U.S. leadership in open financial innovation and potentially miss out on emerging economic opportunities. While Wall Street banks could leverage tokenized assets for efficiency, American retail investors and startups would be locked out of participating fully in the global DeFi wave, exacerbating financial inclusion issues. - This strategy could lead to a 'brain drain' of innovation, weakening the U.S.'s technological edge in digital assets, while other jurisdictions (e.g., Europe or Asia) could attract significant DeFi talent and capital as a result. What long-term capital flow shifts might this regulatory proposal trigger, and which regions or asset classes could benefit or suffer? - The proposal could accelerate a significant capital shift, potentially up to $1.4 trillion, from the U.S. towards more crypto-friendly offshore jurisdictions, particularly in the DeFi and stablecoin sectors. This could directly undermine the U.S.'s standing as a global financial hub. - Offshore DeFi hubs, such as Dubai, Singapore, or emerging European crypto centers, stand to benefit significantly, attracting innovative projects and investments. Global demand for dollar-denominated stablecoins may continue to grow even in offshore markets, but their core infrastructure would be outside U.S. control. - For traditional banking, particularly those exploring blockchain settlement systems, if DeFi innovation is pushed offshore, they might find their permissioned blockchain ecosystems lacking interoperability with the broader digital economy, limiting their long-term growth potential.