Coinbase vs. Wall Street: Tokenization Battle Threatens Crypto Bill
A deepening dispute over tokenized stocks threatens to derail Washington’s push for complete crypto regulation as business executives break up over language within the Senate Banking Committee’s portion of the landmark digital belongings invoice.
Coinbase CEO Brian Armstrong called the contested part a “de facto ban” on tokenized equities earlier this month, whereas conventional finance stalwarts, together with Ken Griffin’s Citadel Securities, argue corporations ought to comply with equivalent guidelines whether or not dealing in blockchain-based or typical securities.
The fracture emerged after Senate Banking Chair Tim Scott released bill text containing provisions that affirm the Securities and Exchange Commission’s authority over monetary belongings resembling shares and bonds, no matter whether or not they exist on blockchain networks.
According to Politico, committee Democrats requested the language’s inclusion, catching many crypto executives without warning and exposing basic disagreements over how rapidly markets ought to transition “on-chain.”
Wall Street Demands Regulatory Parity as Coinbase Seeks Carveouts
Traditional finance corporations and their lobbying arms have drawn a agency line towards preferential therapy for tokenized securities.
“If you might be engaged in securities brokerage actions, you have to be regulated as such,” Securities Industry and Financial Markets Association CEO Ken Bentsen acknowledged, reflecting Wall Street’s insistence that blockchain expertise shouldn’t exempt firms from current market construction guidelines.
Coinbase Chief Policy Officer Faryar Shirzad countered that the disputed language would drive prolonged rulemaking processes as a substitute of permitting SEC Chair Paul Atkins to supply less complicated carveouts from current rules.
“This appears designed to undercut Chairman Atkins’ work on the SEC to implement the president’s crypto agenda, so we’re positively involved about it,” Shirzad informed Politico, emphasizing the supply’s potential to gradual tokenization efforts that many executives take into account inevitable for U.S. monetary markets.
Former SEC official Marlon Paz defended the part, arguing that it clarifies fairly than restricts the company’s authority.
“Tokenization itself doesn’t change the character of the factor,” mentioned Paz, who teaches on the University of Pennsylvania’s regulation faculty, including, “I see this as a web optimistic advancing the ball, offering numerous readability and in no way a de facto ban.“
Securitize CEO Carlos Domingo and Andreessen Horowitz coverage head Miles Jennings have equally argued that the language merely restates current securities regulation with out creating new limitations.
The SEC reinforced this interpretation on Wednesday, when its employees launched an in depth assertion clarifying that tokenized variations of conventional monetary devices stay topic to federal securities legal guidelines whatever the underlying expertise.
The SEC drew a transparent line on tokenization, saying placing shares or bonds on blockchain doesn’t change their authorized standing or exempt them from US securities legal guidelines.#SEC #Tokenizationhttps://t.co/bl7qxOTxa4
— Cryptonews.com (@cryptonews) January 29, 2026
According to the assertion from the company’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets, tokenization modifications the format however not the authorized identification of shares or bonds, with possession recorded on crypto networks nonetheless triggering the identical authorized obligations round providing, promoting, and reporting that apply to traditional securities.
White House Convenes Crisis Talks
Beyond the tokenization dispute, the stalled laws faces mounting procedural and political obstacles that prompted White House intervention.
The administration scheduled a February 2 meeting bringing collectively Coinbase representatives, banking executives, and crypto lobbying teams to resolve disagreements over stablecoin reward provisions which have paralyzed Banking Committee progress, in accordance with Bloomberg and Reuters.
Senator Roger Marshall removed one other impediment by agreeing to not supply his controversial bank card swipe payment modification throughout the markup.
The Kansas Republican’s provision, which might have compelled fee networks to compete on transaction charges, threatened to sink Republican help for the underlying crypto laws earlier than White House officers intervened straight to forestall its consideration, sources confirmed to Politico.
Budget Crisis and Ethics Disputes Narrow Legislative Window
Washington’s approaching government shutdown deadline compounds the invoice’s challenges as Senate Democrats block a $1.3 trillion appropriations package deal following a lethal Minneapolis Border Patrol taking pictures.
Former Utah Governor Gary Herbert known as the standoff proof of “a scarcity of management, a scarcity of potential to work collectively,” whereas congressional sources warned that a whole lot of hundreds of federal staff might face furloughs if negotiations fail earlier than Saturday’s deadline.
White House crypto council director Patrick Witt urged rapid passage regardless of imperfections, warning delays threat “punitive laws within the wake of a disaster, à la Dodd-Frank” if Democrats regain management.
“You may not love each a part of the CLARITY Act, however I can assure you’ll hate a future Dem model much more,” Witt wrote, referencing investment bank TD Cowen’s warning that midterm election positioning might push passage into 2027 with implementation delayed till 2029.
One nameless crypto lobbyist summarized business anxiousness over the disputed tokenization language: “I don’t suppose Congress simply spills ink for enjoyable.“
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