COINBASE FACES WALL STREET CLASH: HOW TOKENIZATION COULD IMPACT CRYPTO LEGISLATION

A growing dispute over tokenized stocks is creating tension in Washington and could delay the passage of comprehensive crypto legislation. Industry executives are split over language in the Senate Banking Committee’s portion of the landmark digital assets bill, highlighting competing visions for the future of on-chain financial markets.

Coinbase Warns of a “De Facto Ban” on Tokenized Securities

Coinbase CEO Brian Armstrong recently criticized a contested section of the bill, calling it a “de facto ban” on tokenized equities. Meanwhile, traditional finance leaders, including Ken Griffin’s Citadel Securities, argue that firms should follow the same rules whether handling blockchain-based or conventional securities.

The dispute emerged after Senate Banking Chair Tim Scott released bill text that reaffirmed the SEC’s authority over all financial assets resembling stocks or bonds, regardless of whether they exist on blockchain networks.

According to Politico, committee Democrats requested this language, surprising many crypto executives and exposing disagreements about how quickly markets should transition “on-chain.”

Wall Street Demands Equal Rules, Coinbase Seeks Carveouts

Traditional finance firms have pushed back strongly against any special treatment for tokenized securities.

“If you are engaged in securities brokerage activities, you should be regulated as such,” said Ken Bentsen, CEO of the Securities Industry and Financial Markets Association.

Coinbase’s Chief Policy Officer, Faryar Shirzad, countered that the bill’s language could slow down tokenization by forcing lengthy rulemaking processes instead of allowing targeted SEC carveouts.

“This seems designed to undercut Chairman Atkins’ work at the SEC to implement the president’s crypto agenda, so we’re definitely concerned about it,” Shirzad told Politico.

Former SEC official Marlon Paz defended the section, clarifying that it doesn’t ban tokenization:

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“Tokenization itself doesn’t change the character of the thing… It provides clarity and is a net positive,” he said.

Securitize CEO Carlos Domingo and Andreessen Horowitz policy head Miles Jennings echoed this view, noting that the language simply restates existing securities law without creating new barriers.

SEC Confirms Tokenized Assets Are Still Securities

The SEC reinforced this interpretation, confirming that tokenized versions of traditional stocks and bonds remain subject to federal securities laws. According to the agency, blockchain merely changes the format; legal obligations for offering, selling, and reporting remain identical to conventional securities.

White House Steps In to Resolve Deadlock

The legislation’s progress has been stalled by disagreements over tokenization and stablecoin reward provisions. To resolve the impasse, the White House scheduled a February 2 meeting with Coinbase, banking executives, and crypto lobbying groups.

Additionally, Senator Roger Marshall removed a potential hurdle by agreeing not to introduce a controversial credit card swipe fee amendment, preventing further delays.

Budget Deadlines and Political Challenges Complicated Passage

The approaching government shutdown deadline adds pressure to the bill. Senate Democrats are blocking a $1.3 trillion appropriations package, and congressional sources warn that federal workers could face furloughs if the standoff continues.

Patrick Witt, director of the White House crypto council, emphasized the urgency:

“You might not love every part of the CLARITY Act, but I can guarantee you’ll hate a future version even more if passage is delayed.”

An anonymous crypto lobbyist summed up industry concerns:

“I don’t think Congress just spills ink for fun.”

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