Coinbase CEO Brian Armstrong Says US Won't Become 'Crypto Capital Of The World' If One Policy Proposal Passes

Coinbase COIN CEO Brian Armstrong warned that a sweeping new proposal advanced by Senate Democrats is “a bad proposal” that would “set innovation back.”

Senate Democrats Push Sweeping DeFi Broker Rule

The draft, first reported by Politico, reportedly outlines how Senate Banking Committee Democrats plan to classify decentralized finance operations.

The language suggests that firms or individuals providing front-end access to DeFi platforms must register with the Securities and Exchange Commission or the Commodity Futures Trading Commission as brokers.

According to the report, this definition could include "anyone designing, deploying, operating, or profiting from a DeFi front-end," while protocols that earn no revenue could be considered "sufficiently decentralized" and remain outside the scope of regulation.

Industry lawyers say the proposal, if enacted, would create broad liability and force open-source developers and DeFi startups to register under complex securities rules.

Blockchain Association Slams ‘DeFi Ban' As Industry Killer

The Blockchain Association blasted the draft rule, warning it could drive the $1 trillion DeFi industry overseas and result in a "ban on DeFi" in America.

Blockchain Association CEO Summer Mersinger said the plan "would effectively ban decentralized finance, wallet development, and other applications in the United States."

"The language as written is impossible to comply with and would drive responsible development overseas," Mersinger said in a statement.

She urged lawmakers to "stay at the table" and ensure any legislation "supports, rather than hinders, American leadership in financial technology."

Coinbase CEO Armstrong echoed her call, saying the proposal would prevent the U.S. from becoming “the crypto capital of the world.”

The industry's pushback highlights growing tension in Washington over how to handle DeFi as part of the broader crypto market structure debate.

Republicans on the Senate Banking Committee have already labeled the proposal "unworkable," with one committee spokesperson calling it "not a good-faith effort to engage on market structure."

Analysts Warn $1 Trillion Capital Flight Ahead

Market analysts say the proposal could accelerate a capital shift toward offshore jurisdictions, similar to trends seen in previous regulatory crackdowns.

Standard Chartered Plc STAN estimates that DeFi-driven stablecoin growth could pull $1 trillion in deposits from emerging-market banks over the next three years

JPMorgan Chase & Co. JPM forecasts $1.4 trillion in new demand for dollar-based stablecoins by 2027.

With major U.S. banks including Goldman Sachs Group Inc. GS, Citigroup Inc. C, and UBS Group AG UBS now exploring blockchain-based settlement systems, analysts caution that strict DeFi rules could slow American progress in digital asset innovation.

Wall Street Banks Quietly Build Blockchain Settlement Rails

The Senate's crypto market structure discussions have stalled amid negotiations over government funding.

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.

The new DeFi proposal adds another layer of complexity.

It gives the Treasury Department power to define when a protocol or entity "exercises control or sufficient influence" over a decentralized platform.

Why It Matters

DeFi is not just another crypto experiment, it is the architecture powering global stablecoin flows, on-chain credit, and automated markets.

If the U.S. moves to classify front-ends as brokers, it effectively criminalizes the gateways that make these systems usable.

The irony is that while Washington debates restrictions, U.S. banks like Goldman and Citi are building tokenized settlement rails of their own.

That divergence could set the stage for a two-tier financial system where Wall Street captures permissioned blockchains and DeFi innovation migrates offshore, leaving American retail and startups locked out of the next trillion-dollar wave.

Read Next: