Coinbase is walking a tightrope in negotiations over the Transparency Act, telling the staffs of U.S. senators that it is not satisfied with their latest compromise proposal, but has not publicly opposed it, according to people familiar with the situation.
The draft agreement was presented to crypto industry stakeholders on Monday and to banking industry stakeholders on Tuesday. There were mixed reactions from the crypto industry, according to people familiar with Monday’s meeting. While some stakeholders (particularly Coinbase) were unhappy, others were “pleasantly surprised,” one of the people said. No one can carry around a copy of the text and it has not yet been distributed.
People familiar with Monday’s meeting said there are still issues to resolve and suggested the proposal could hinder stablecoin-related products and services more than they hoped.
The new proposals would instruct some regulators to draft rules setting out exactly how issues such as remuneration would be overseen. Some are concerned about regulators issuing subjective standards for how to govern permissible activities, noting that there may ultimately be different types of compensation programs. Any rulemaking needs to be neutral, they said.
It is also said that this language could potentially limit companies’ ability to tie rewards to the size of stablecoin transactions in their accounts, which could be a hurdle for programs similar to credit card rewards.
Throughout the months of negotiations, Coinbase CEO Brian Armstrong has been the leading voice, and his opposition to early efforts to compromise stablecoin yields led to the derailment of a scheduled Senate hearing. Armstrong, a White House favorite in the crypto space, will lead the company that could stand to lose the most from the rollback of its stablecoin rewards program.
On an industry conference call this week, people said Coinbase has clashed with other companies over the bill, suggesting a divided view on cryptocurrencies on how to proceed. For some, giving up the rewards of certain stablecoins may be costly, while losing the full-scale establishment of cryptocurrencies within the US financial system due to the Clarity Act is considered a greater risk for others.
The latest document to be released (expected later this week or early next week) is likely to be amended from the document shared Monday and Tuesday, but lawmakers are unlikely to want a major rewrite of the long-debated document.
So far, bankers have not publicly expressed their views on the proposal.
The crypto industry’s potential concerns about the proposed approach, first reported by CoinDesk this week, have already caused turmoil in the market for shares of major US stablecoin issuers Circle and Coinbase. Circle stock fell 20% on Tuesday, but rose slightly on Wednesday. But Tuesday’s news that archrival Tether would submit to an audit may have been another factor in the hit to Circle stock, observers said.
Despite the negative reaction to the Clarity Act changes, White House crypto advisor Patrick Witt criticized “ignorant” people making predictions about the status of the Clarity Act.
“Everything will be fine,” he posted on social media site X (formerly Twitter) on Wednesday. “It’s bullish.”
Some argued for taking a step back.
“Everyone should take sedatives and refrain from Twitter,” the source said.
