Coinbase CEO Brian Armstrong is laying out what he thinks is a “realistic blueprint” for future crypto regulations in the US and abroad.
Armstrong says in a new blog post that policymakers should start by regulating and providing clarity for centralized entities and kick that process off by regulating stablecoin issuers.
The CEO says companies shouldn’t have to be a bank to issue stablecoins, but they could register as a state trust or an OCC [Office of the Comptroller of the Currency] national trust charter.
He also thinks they should undergo “rigorous” annual audits, establish controls and board governance, meet basic cybersecurity standards and possess blacklist capability for sanctions.
Next, Armstrong thinks regulators should move to exchanges and custodians. He thinks policymakers should implement robust know-your-customer (KYC) and anti-money laundering (AML) policies, establish a federal licensing and registration regime, require solid consumer protection rules, create minimum safeguarding standards and prohibit various forms of market misconduct.
He also thinks regulators need to clarify what crypto assets are securities and what are commodities.
Next, Armstrong says it’s critical for regulators to enforce a level playing field.
“It means that if you are a country who is going to publish laws that all cryptocurrency companies need to follow, then you need to enforce them not just domestically but also with companies abroad who are serving your citizens. Don’t take that company’s word for it.
Actually go check if they are targeting your citizens while claiming not to. If you don’t have the authority to prevent that activity, then you’ll need to work with international law enforcement.”
He also thinks regulators should allow decentralized crypto projects to remain innovative because they can ensure customer protection on their own. The CEO notes that self-custodial wallets, for example, don’t require trust in third parties. Smart contracts are open-source and can be audited.
“Self-custodial wallets should be treated as software companies, not regulated as financial service businesses, because they never take possession of customer funds. Similarly, creating decentralized protocols or hosting a website on IPFS [inter-planetary file system] should be equivalent to publishing open-source code, which is protected by freedom of speech in the US. People may send money through a web browser or over internet protocols, but we don’t regulate these as financial service businesses, and the same concept applies here.”
Armstrong says he’s “optimistic” progress can be made on all these fronts next year, despite the public headwinds the crypto sector has faced at the end of 2022.
“With regulatory clarity for centralized actors, a level playing field, and decentralized crypto innovation preserved, crypto can bring enormous benefits to the world. Right now, there is too much distraction from bad actors causing harm, and we all need to take responsibility for improving this. I’m optimistic that we can make significant progress on the above in 2023 and get crypto legislation passed.”
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