Brian Armstrong, CEO of Coinbase, has argued for stronger rules on centralised crypto operators but believes decentralised protocols should be allowed to grow since they represent “the ultimate form of disclosure” because to open-source software and smart contracts.
As the market continues to recover from the harm caused by FTX and its shocking collapse, Armstrong offered his thoughts on cryptocurrency regulation in a blog post published on December 20 by Coinbase. He suggested ways that regulators might assist “restore trust” and advance the business.
However, the Coinbase CEO highlighted that decentralized protocols are not a factor in that calculation.
He further added,
“Decentralized arrangements do not involve intermediaries [and] open-source code and smart contracts are “the ultimate form of disclosure,…… transparency is built in by default……cryptographically provable way.”
Because people are engaged, Armstrong, the CEO of Coinbase, stated that “extra transparency and disclosure” checks are required for centralised actors. Armstrong expressed the hope that the fall of FTX “will be the trigger we need to finally get new legislation approved.”
He continued, “where we’ve seen the biggest danger of consumer harm, and pretty much everyone can agree [that regulation] should be done” are exchanges, custodians, and stablecoin issuers.
Armstrong recommended that the United States begin with stablecoin regulation in accordance with general financial services legislation and that regulators enforce the application of a state trust charter or an OCC national trust charter.
Coinbase CEO’s Take On Stablecoin Issuers
The Stablecoin Transparency Act, which was just introduced by U.S. Senator Bill Hagerty, is anticipated to be approved by the Senate in the near future.
Armstrong continued, “Stablecoin issuers should still have to pass “minimum cybersecurity criteria” and develop a blacklisting system in order to comply with regulatory requirements. Issuers shouldn’t have to be banks, unless they desire fractional reserves or to invest in riskier assets.
Armstrong thinks that once stablecoin regulation is established, regulators focus on cryptocurrency exchanges and custodians.
The CEO of Coinbase stated that in addition to improving consumer protection laws and banning market manipulation techniques, regulators should enact a federal licensing and registration scheme to allow the exchanges or custodians to legally serve customers inside that market.
Armstrong suggested that the U.S. Congress should require the Securities Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) to classify each of the top 100 cryptocurrencies by market cap as either a commodity or a security, despite the fact that the courts are still figuring things out in this area.
“If asset issuers disagree with the analysis, the courts can settle the edge cases, but this would serve as an important labeled data set for the rest of the industry to follow, as, ultimately, millions of crypto assets will be created.”
Armstrong also asked authorities from all nations to look beyond what is happening in their domestic market to assess the effects that a foreign business may be having on their population in light of the global reach of cryptocurrency-based businesses.
In order for the business to be effectively regulated, corporations, legislators, regulators, and customers from financial markets all over the world—particularly those from G20 countries—will need to work together, according to Armstrong.
Armstrong stated that he is still optimistic that considerable legislative progress may be accomplished in 2023 despite the complexity and range of issues that need to be resolved.