Brian Armstrong, CEO of Coinbase, shared his vision for consistent regulation of the cryptocurrency ecosystem. We find there in particular the importance of the distinction between the centralized actors and the technology itself.
Coinbase CEO calls for sound regulation
Brian Armonstrong, the CEO of Coinbase, posted a Twitter thread followed by a blog post in which he gives his vision on what should be effective regulation of the cryptocurrency ecosystem :
1/ I often get asked: “What does regulatory clarity actually look like for crypto?” So I outlined a realistic blueprint for this that regulates centralized actors, while preserving decentralized innovation. https://t.co/sYsNR7igVQ
—Brian Armstrong (@brian_armstrong) December 20, 2022
What stands out first is the distinction that is made between technology on the one hand, and centralized actors on the other. He thus calls for regulatory clarity :
“It is best to first create regulatory clarity around centralized crypto players […], because that’s where we’ve seen the most risk of harm to consumers, and just about everyone can agree that it should be done. »
It’s a quote that directly echoes the news. Indeed, Brian Armstrong points to the legal vagueness and the tendency of regulators to focus on their own national market, which contributes to the emergence of offshore companies, such as FTX in the Bahamas. It then becomes difficult to prosecute such companies if they do not conform to a country’s rules.
In the same logic, he encourages the United States to adopt regulations at the national level, so as to create harmony between the states, drawing a parallel with the MiCA regulations in Europe.
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The case of DeFi
Much of the Coinbase CEO’s pitch is also about the regulation of decentralized finance (Challenge). Overall, the message could not be clearer and can be summed up simply:
“Let innovation happen in decentralized crypto. »
Indeed, Brian Armstrong points out that the open source character of DeFi and Web3 creates, thanks to smart contracts, an environment where just trust the laws of mathematics. Similarly, the rise of decentralized autonomous organizations (DAOs) will ultimately promote on-chain accounting, and with it, transparency.
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Rethinking the Howey test
Howey’s test is used to determine whether a financial asset is a commodity or a financial security. But Brian Armstrong shows the limits, from the moment or even the Commodity Futures Trading Commission (CTFC) and the Securities and Exchange Commission (SEC) can’t agree when it comes to cryptocurrencies.
He thus proposes to review this test in order to adapt it to our ecosystem. The CEO of Coinbase indeed indicates that one of the conditions often invoked to classify a cryptocurrency as a financial security, is the investment in expectation of a financial return. However, this reasoning can also be applied to precious metals or works of art, which does not make them financial securities.
Brian Armstrong also informs that on this level, Coinbase is working on its own analysis of ecosystem assetsand that society can approach regulators to help set standards.
👉 Also in the news – Basel Committee: banks will be able to hold 2% of their reserves in cryptocurrencies
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