Armstrong On Cryptocurrency Regulation:
According to Armstrong, authorities should concentrate on centralized exchanges and custodians since they pose the most significant risk to consumer safety.
Brian Armstrong, CEO of Coinbase, has argued for more vital rules on centralized crypto operators but believes decentralized protocols should be allowed to grow since they represent “the ultimate form of disclosure” because of 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 in “restoring trust” and advancing the business.
However, the Coinbase CEO highlighted that decentralized protocols are not a factor in that calculation.
On-chain “transparency is built in by default” in a “cryptographically proven way” and, as such, should be mostly left alone, Armstrong said, adding that decentralized arrangements do not require middlemen and open-source code and smart contracts are “the ultimate form of disclosure.”
Because people are engaged, Armstrong, the CEO of Coinbase, stated that “extra transparency and disclosure” checks are required for centralized actors. Armstrong expressed the hope that the fall of FTX “will be the trigger we need to get new legislation approved finally.”
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 by general financial services legislation and that regulators enforce the application of a state trust charter or an OCC national trust charter.
The Stablecoin Transparency Act:
The Stablecoin Transparency Act, introduced by U.S. Senator Bill Hagerty, is anticipated to be approved by the Senate shortly.
Armstrong continued, “Stablecoin issuers should still have to pass “minimum cybersecurity criteria” and develop a blocklisting system to comply with regulatory requirements. In addition, issuers should only have to be banks if 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 licencing and registration scheme to allow the exchanges or custodians to serve customers inside that market legally.
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, even though the courts are still figuring things out in this area.
As millions of crypto assets would eventually be generated, he added, “the courts can settle the edge cases if asset issuers disagree with the analysis, but this would serve as an essential labelled data set for the rest of the sector to follow.
Global Reach Of Cryptocurrency:
Armstrong also asked authorities from all nations to look beyond what is happening in their domestic market to assess the effects a foreign business may have on their population in light of the global reach of cryptocurrency-based companies.
“You need to enforce them not just domestically but also with companies abroad who are servicing your citizens,” said Armstrong, adding: “If you are a government who is going to establish regulations that all cryptocurrency companies need to obey.”
Don’t believe anything that company says. See whether they are not targeting your citizens as they claim to be.”
According to Armstrong, “tens of billions of dollars of wealth have been lost” due to nations turning a blind eye to the international practices their citizens have been subjected to. “If you don’t have the authority to prevent that activity you will unintentionally be incentivizing companies to serve your country from offshore,” he added.
According to Armstrong, the business will need to work together for the company to be effectively regulated by corporations, legislators, regulators, and customers from global financial markets—particularly those from G20 countries.
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.