Armstrong said that because the change in the center and depositors has a high risk of harming consumers, regulators should focus on the former.
Coinbase CEO Brian Armstrong has pushed for stricter rules on central crypto players, but he says the rules must be left unenforceable because the open source and smart contracts are “the ultimate form of expression.
Armstrong shared his thoughts on cryptocurrency law on Dec. 20 Coinbase blog post where he offered how regulators can help “restore confidence” and keep the company moving forward as the market continues to recover damage caused by FTX and its failure. But decentralized systems are not part of this equation, the CEO of Coinbase said.
Armstrong explained, adding that in it, “understanding is built in by default” and “cryptographically” “the best kind of demonstration provable way” and such will be left largely alone. Coinbase CEO says “increased transparency and visibility” management is important for centralized players because humans are involved, Armstrong expects the failure of FTX “will be what motivates us to finally withdraw from a new law”.
Stablecoin exchanges, supervisors, and providers are “where we have seen the worst risk of consumers and just about everyone can agree [the law] should be done,” he said.
Armstrong indicated that the United States is starting with the regulation of stablecoins according to the Financial Services Act, suggesting that the regulators include the introduction of a state trust certificate or a national trust certificate of OCC. Now, US Senator Bill Hagerty introduced the Stablecoin Transparency Act, which is expected to pass the Senate soon in the coming months.
Armstrong added that issuers should not be banks unless they need small amounts of money or invest in risky assets, but issuers still need to meet “basic cybersecurity standards” and establish a registration process to comply with legal requirements. Once the stablecoin regulations are settled, Armstrong suggests that regulators target cryptocurrency exchanges and investors.
Coinbase CEO suggested that regulators establish a federal licensing and registration process to allow exchanges or social media to serve people legally in the market, in addition to enforcing consumer protection laws and preventing market manipulation. Regarding commodities and securities, Armstrong admitted that while the court is still investigating, he suggested that the US Congress ask the Commodities Futures Trading Commission (CFTC) and the United States Securities Exchange Commission (SEC) to separate each of the 100 cryptocurrencies from large market capitalization such as securities or commodities.
“If the providers do not agree with the investigation, the court can solve the side cases, but this will serve as an important element of the name of the data for other companies that follow, because, at the end of the account, millions of crypto assets will be created, “he said. Given the international nature of cryptocurrency-based business, Armstrong urged regulators in all countries to look beyond what is happening in the market to consider the implications that foreign business can have on its citizens.
“If you are a country that will issue laws that all cryptocurrency companies must follow, you need to enforce them not only domestically, but also in overseas companies that serve your citizens,” said Armstrong.
“Don’t believe this company’s word. In fact, go check if they are targeting your citizens instead of pretending not to.
“If you can’t prevent this work […] you will make various companies unwittingly move to serve your country from overseas,” explained Armstrong, adding that “ten trillion dollars of wealth is lost” because of different countries turned a blind eye to the behavior of those they rule in other countries.
Armstrong added that in order for the industry to be properly regulated, there will be a need for a collaborative effort by businesses, policymakers, regulators, and clients from the financial markets around the world, especially those in G20 countries. Despite the confusion and various issues to be resolved, Armstrong said he remains optimistic that meaningful progress can be made in 2023 before the legislature.
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