The biggest crypto exchange in the US is weighing in on the national security risks of digital assets after the Department of the Treasury requested feedback from the American people on the issue.
Paul Grewal, the chief legal officer at Coinbase, says the blockchain gives “powerful tools” to exchanges to help them disrupt illicit finance and comply with anti-money-laundering regulations.
“So, instead of imposing new, less effective bulk data requirements on crypto exchanges, we recommend that U.S. Treasury focus on incentivizing and unlocking new blockchain compliance tech (like digital identity and blockchain analytics) that focuses on effectiveness.”
Grewal says the blockchain gives virtual asset service providers (VASPs) like exchanges more access to transactional records than traditional financial institutions.
“In contrast, a traditional financial institution is largely limited to using private, opaque ledgers that are only available to that specific institution. This creates a significant risk of blind spots for traditional financial institutions because it is difficult — if not impossible — for them to fully monitor transactions that happen off of their individual platforms.”
The Coinbase executive also notes that criminals who take advantage of noncompliance are the ones who pose an illicit finance risk in the crypto sector.
“The US government already has the power to enforce existing rules. Noncompliance with current rules does not mean there are gaps in existing rules.
We see enormous opportunity for the US to lead the world in crypto innovation, but this opportunity depends on U.S. Treasury creating the right regulatory environment to foster growth for compliant companies while holding others accountable.”
The Treasury Department sought feedback from the American people after the Biden Administration unveiled the first-ever framework for the development of digital assets in September.
Read Coinbase’s full response here.
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