The cryptocurrency markets are at a critical point in an era of profound uncertainty. Coinbase CEO Brian Armstrong has also warned about a proposed US Senate bill addressing decentralized finance (DeFi). The proposal would also revamp the workings of crypto platforms in the country, which caused fear among developers, investors, and policy analysts. With the controversy surrounding the topic, a question remains: will this proposal save lives or undermine crypto dominance in America?

The Senate Democrats Are Advancing Tougher Crypto Regulation

The bill, presented to the Senate Banking Committee this week, examines stricter control over decentralized platforms. It would categorize DeFi front-ends as brokering, which would fall under regulatory jurisdiction by the SEC and CFTC.

Congressmen aim to curb the abuse of decentralized applications; however, industry participants fear that the bill will stifle innovation. Non-custodial wallets are also subject to Know Your Customer (KYC) checks, as proposed in the proposal, given their popularity among individual crypto holders.

Sent to Republican committee members on October 9, the plan has drawn widespread resistance from within the industry. Reports suggest that it could also remove legal protections for crypto developers, resulting in significant compliance burdens. Many fear that these measures will drive both developers and investors to relocate their projects abroad.

Industry Leaders Warn of Innovation Exodus

Coinbase CEO Brian Armstrong voiced his objection on X, formerly Twitter, stating, “We absolutely won’t accept this.” He described the proposal as a “bad idea” that could halt America’s progress in crypto innovation. Armstrong pledged continued cooperation with Congress to shape fair and transparent industry rules.

Other leaders echoed his concerns. Summer Mersinger, CEO of the Blockchain Association, said the bill would “effectively ban decentralized finance, wallet development, and other applications” in the United States. She added that the proposed rules would make compliance nearly impossible and slow technological progress. Mersinger urged lawmakers to seek balanced solutions that support responsible growth.

Gabriel Shapiro, founder of MetaLeX Labs, warned that the plan could punish US citizens using DeFi platforms on the proposed restricted list. He cautioned that it might criminalize earning recurring income through such applications.

Clash Between Innovation and Regulation

Jake Chervinsky, a prominent crypto lawyer, said the Senate plan could undo progress made by the bipartisan CLARITY Act passed in July. He argued the new proposal doesn’t regulate crypto, it bans it.

The legislation aims to categorize most DeFi entities dealing with customers as regulated brokers. Industry participants view this as a potential disaster for US crypto startups, fearing tighter controls could block funding and stifle development.

Armstrong and others believe such steps threaten America’s status as a global crypto hub. Many developers have already expressed plans to move operations to friendlier jurisdictions if the bill advances.

Nevertheless, a dialogue between legislators and business executives persists despite the increased tension. Armstrong remarked that Coinbase will continue to lobby for regulations that will allow it to grow and still be compliant. His message to Washington was very simple: innovation will not win with old structures.

Conclusion

The Senate DeFi bill is sparking intense opposition from Coinbase CEO Brian Armstrong and other crypto executives, who believe it could continue to stall American innovation. The demand for increased supervision, KYC controls, and accountability of developers raises concerns regarding the potential for pushing talent out of the country.

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