DeFi Bill Draws Industry Backlash, Coinbase CEO Labels It ‘Bad’ Law

TLDR

• The Coinbase CEO publicly condemned the new DeFi Bill proposed by Senate Democrats.
• He warned that the bill threatens innovation and economic freedom in the United States.
• The proposal includes mandatory KYC rules for non-custodial wallets and defines developers as intermediaries.
• Industry leaders stated that the bill would effectively ban DeFi development nationwide.
• The Blockchain Association called the proposal unworkable and damaging to the crypto ecosystem.

Senate Democrats’ new DeFi Bill has sparked backlash, halted bipartisan talks, and triggered warnings from top crypto executives. The Coinbase CEO condemned the proposal, while legal experts and industry associations warned of a nationwide DeFi shutdown. Lawmakers on both sides now blame each other as progress on crypto legislation collapses.

Armstrong Calls DeFi Bill a Blow to Innovation

Coinbase CEO Brian Armstrong harshly criticized the proposed DeFi Bill, calling it “bad, plain and simple” on October 9, 2025. He warned the legislation would harm innovation and drive U.S. crypto development overseas. Armstrong confirmed that Coinbase will continue to work with Congress to “protect economic freedom.”

The DeFi Bill introduces mandatory Know-Your-Customer (KYC) rules for non-custodial wallets and redefines DeFi developers as financial intermediaries. It also grants the U.S. Treasury unchecked authority to blacklist DeFi protocols through a “restricted list.” Armstrong emphasized that the bill misrepresents how decentralized systems operate and urged lawmakers to rethink.

Legal officers and industry players echoed his concerns. Jake Chervinsky, Chief Legal Officer at Variant, described the bill as a “crypto ban” that would force developers abroad.

Industry Leaders Unite Against ‘Unworkable’ Provisions

The Blockchain Association’s CEO, Summer Mersinger, said the bill’s language is “impossible to comply with.” She argued it would “effectively ban” DeFi innovation and wallet development across the United States. Other stakeholders described the requirements as unrealistic and legally incoherent.

Chervinsky added that the DeFi Bill uses “overbroad definitions” that criminalize core blockchain development activities. He warned the bill sets a dangerous precedent that may stifle open-source software and developer freedom. These issues triggered urgent calls for a reevaluation of the legislative approach.

Critics say the DeFi Bill fails to distinguish between protocol builders and centralized financial institutions. They claim it ignores technical nuance and overregulates digital infrastructure. As a result, it may force U.S. DeFi leadership into offshore jurisdictions.

Senate Gridlock Deepens as House Advances

The Senate Banking Committee has paused negotiations after Republicans rejected the proposal as unserious. A spokesperson for Senator Tim Scott labeled the DeFi Bill a “not good-faith effort.” They criticized the bill’s content as incoherent and damaging to bipartisan progress.

Talks collapsed after Punchbowl News reported the leaked Democratic draft. Scott’s office accused Democrats of using leaks to shape public opinion instead of working on the bill. Meanwhile, Senator Ruben Gallego’s team claimed Republicans “crashed out” to avoid compromise.

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