In the intense battle in Washington over "how to regulate cryptocurrency," Coinbase CEO Brian Armstrong is at the center of attention. As the co-founder and CEO of the largest cryptocurrency exchange in the U.S., he is not only a key player in the crypto industry but has also become one of the central figures in the U.S. Congress's legislative process for crypto regulation.
Recently, in an interview at Davos, he rarely spoke publicly about why he suddenly "withdrew support" for a key legislative proposal, directly pointing out that traditional banks' lobbying power is trying to protect their own interests through regulations. His core argument is straightforward: "Banks should compete in a fair environment, not through legislation that 'shuts out competitors.'"
From the "Genius Act" to a new round of "market structure" disputes
Armstrong recalled that last year, the U.S. passed significant legislation known as the "Genius Act," which established the first compliance framework for crypto-related businesses such as stablecoins, which he views as a major advancement for the crypto industry.
However, the focus of the debate on Capitol Hill has shifted from "whether to recognize crypto" to "how to design market structure":
A regulatory framework primarily targeting non-stablecoin crypto assets;
Led by the Senate, with active participation from regulators, traditional financial institutions, crypto companies, and others.
As one of the industry leaders, Coinbase participates in policy discussions and presents its views, but Armstrong continually emphasizes: "Coinbase does not represent the entire crypto industry; we are just one important participant."
Seeing the "draft text" at midnight and flying to Washington the next day
He revealed that this turmoil stemmed from a bill draft that was only made public at "midnight on Monday":
On Tuesday, the company's legal team began an urgent review of the text;
On Wednesday, he immediately flew to Washington to communicate directly with lawmakers;
During the review process, the team discovered some "very serious issues" in the draft, but did not see a clear path for amendments in the Senate Banking Committee's process.
In this situation, Armstrong believes that Coinbase has an obligation to stand up for its users and defend their rights. The result was that Coinbase publicly expressed strong concerns about certain provisions of the draft, leading the Senate to decide to pause the original advancement schedule to allow for further communication among all parties.
One of the core conflicts: interest on stablecoins and "protecting banks" provisions
When asked about "the most problematic point in this draft," Armstrong's primary issue was very clear:
The payment mechanism for stablecoin "yields/rewards."
His main points are:
Americans should have the right to earn higher returns on their own funds;
If the interest rates offered by banks are not high enough, and stablecoin products can provide better returns through more market-oriented means, then banks should compete by raising interest rates, not by using legislation to 'shut out competitors';
"There should be no protectionist provisions just to prevent banks from facing competition."
When the host pressed whether these restrictive provisions were written into the draft under the influence of bank lobbying, Armstrong's answer was very direct: "Yes."
Banks' concerns: deposits being "siphoned off," credit systems being squeezed
Of course, traditional banks have their own logic.
Their main concerns are:
If stablecoins develop on a large scale, it could lead to large outflows of deposits from the banking system;
The need to hold a large amount of U.S. Treasury securities to provide 100% reserves for stablecoins could change the way these assets are used in the traditional credit system, thereby affecting the efficiency of credit supply in the U.S.
In response, Armstrong stated:
The allocation of capital between bank loans and purchasing U.S. Treasury securities is inherently a dynamic balancing process that will automatically adjust based on risk and return;
During a rate hike cycle, more funds will remain in assets with higher interest rates and lower risk; during a rate cut, funds will naturally flow to higher-yielding loans and other products;
Currently, many banks are already keeping "huge amounts of funds" in the Federal Reserve and short-term Treasuries, and this allocation method is not fundamentally different from the underlying asset structure of stablecoins.
In his view, crypto technology can provide stablecoin rewards, DeFi lending, and other new products, and traditional banks can also choose to participate and offer similar services. The key is:
"There should be a fair playing field that everyone can participate in, with clear rules, rather than allowing anyone to block competitors through lobbying."
Regulatory alignment: Should crypto companies be regulated by "bank standards"?
An unavoidable question is:
If crypto institutions are to compete on the same playing field as banks, should they also accept the same level of regulation as banks?
Armstrong's answer provided his "tiered regulation" logic:
Commercial banks engage in "fractional reserve" business:
They take customer deposits to lend and invest, making money through interest rate spreads;
Customers are generally not informed of the specific flow of these funds, thus requiring extremely strict prudential regulation and capital constraints.
Under the "Genius Act" framework, stablecoin issuers must implement a 100% reserve requirement:
All stablecoins must be backed by equivalent, short-duration U.S. Treasury securities or other safe assets;
They are not allowed to engage in fractional reserve lending like traditional banks.
In this model:
Stablecoins themselves are more like a hybrid of "money market funds + payment tools";
The truly high-risk, leveraged, or credit-risk services are those that users voluntarily choose to participate in, such as DeFi lending, rather than the "implicitly passive" on-balance-sheet activities of banks.
Armstrong emphasized:
The heavy regulation of the banking industry is because they take customer funds to earn interest spreads without "individual user permission"; whereas DeFi lending and similar products are based on the premise that "users actively choose and clearly understand the risks they are taking."
Cooperating while being targeted by the "lobbying department"
Interestingly, at the business level, Coinbase's relationship with traditional banks is not just adversarial:
Coinbase is already providing crypto infrastructure services for 5 of the top 20 banks globally;
The commercial departments of these banks generally view crypto as a new business opportunity, hoping to offer services such as custody, trading, and tokenized assets.
However, at the policy level, the situation is quite different:
Many banks' lobbying teams and industry associations are actively promoting certain provisions that attempt to restrict or even "shut down" potential crypto competitors;
This has created a complex dynamic of "front-end cooperation and back-end confrontation"—the business departments want to innovate, while the lobbying departments want to protect vested interests.
Armstrong's stance is:
"You cannot legislate to ban competition. Policies should not be designed to favor only one type of company, but should clearly delineate the boundaries of what is allowed and prohibited, allowing everyone to compete under the same rules, ultimately letting the market and users decide."
NYSE's entry: The future landscape is "you within me"
As the regulatory battle continues to heat up, traditional financial giants are also accelerating their "on-chain" efforts. The New York Stock Exchange recently announced that it will launch a new tokenization platform, planning to focus on "tokenized stocks" and other directions, which is seen as a direct challenge to crypto platforms including Coinbase.
Regarding this, Armstrong's attitude is quite positive:
He expressed that he is "very pleased to see" the NYSE's entry, believing this is just "another piece of evidence that crypto is upgrading the traditional financial system";
In his view, the more traditional institutions participate in tokenization, on-chain settlement, and asset digitization, the more it can enhance the efficiency of capital markets.
As for competition, his statement reflects an "internet mindset":
"If everyone can do these things, then the ultimate beneficiaries are the users. We do not need to use policies to protect someone's 'moat'; instead, we need clear rules to ensure user rights and then let the market decide who is more valuable."
Conclusion: The real game is a struggle for rules and discourse power
This tug-of-war over crypto regulation superficially involves technical issues such as stablecoin yields, the efficiency of Treasury securities usage, and credit supply, but behind it is actually:
The conflict of business models between traditional banks and crypto platforms;
The struggle for discourse power over who defines "what is compliant innovation";
And the long-term battle over who will own the future of "financial infrastructure."
Armstrong's answer is very clear:
It is not about using regulation to "protect banks and suppress crypto," but about using rules to delineate boundaries, allowing banks and crypto companies to compete on the same playing field based on their strengths.
The direction of this game not only relates to the evolution path of the U.S. financial system but will also profoundly impact the competition and integration of global crypto assets and traditional finance. For all those concerned with financial innovation and regulatory trends, this is definitely not a discussion of "watching the excitement," but rather a rewriting of the financial rules for the coming decades.
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