Crypto regulation should strike a balance by implementing a registration and licensing regime to enable the exchanges or custodians to legally serve consumers within that market, strengthening consumer protection rules and eliminating market manipulation tactics.
- Coinbase CEO Brian Armstrong has called for sterner regulation in the centralized crypto space.
- Regulators worldwide should look beyond what is happening within their domestic markets while considering the implications a foreign crypto business may have on their citizens.
- The lack of authority to prevent illegal activities helps unintentionally incentivize crypto companies to serve a country offshore.
Coinbase CEO Brian Armstrong has called for sterner regulation in the centralized crypto space. Contrastively, Armstrong has reiterated that decentralized finance (DeFi) protocols should be allowed space to flourish, considering that smart contracts and open-source code represent the highest form of disclosure.
The Coinbase CEO offered his opinions on crypto regulation while proposing ways for crypto regulators to help restore trust and advance the crypto industry amidst the shock and damage occasioned by the FTX collapse. However, as global crypto actors look to step up crypto regulation, Armstrong emphasized that decentralized does not form part of that regulation equation.
Managing stablecoins issuers
According to him, intermediaries are not part of DeFi protocols. In DeFi, transparency is built by default in a provable way cryptographically. The Coinbase CEO reiterated that additional disclosure and transparency remain necessary for centralized crypto since the system involves human actors. Armstrong hopes that the FTX collapse will act as the necessary catalyst for creating proper crypto regulation.
Stablecoins issuers, custodians and exchanges have posed the highest risk to consumers, and most stakeholders agree that these represent the highest need for regulation. Armstrong advises that regulators should first focus on regulating stablecoins according to standard financial regulation laws.
Armstrong further pointed out that stablecoins issuers should not necessarily be banks unless they need fractional reserves or invest in risker assets. Nonetheless, stablecoins issuers must satisfy fundamental cybersecurity standards and have in place a blacklisting procedure to comply with sanction requirements. After addressing stablecoins regulation, Armstrong advises that crypto regulators should then focus on crypto custodians and exchanges.
Striking a balance on proper crypto regulation
The Coinbase CEO says that crypto regulation should strike a balance by implementing a registration and licensing regime to enable the exchanges or custodians to legally serve consumers within that market, strengthening consumer protection rules and eliminating market manipulation tactics.
Considering the international reach of crypto-based businesses, Armstrong further urged regulators worldwide to look beyond what is happening within their domestic markets while considering the implications that a foreign crypto business may have on their citizens.
He reiterated that if a country wishes to publish crypto regulation rules for all companies, they must enforce them domestically and with foreign companies serving their citizens. Armstrong urged crypto regulators to exercise caution and due diligence to shield consumers from fraudulent targeting by crypto companies.
The lack of authority to prevent illegal activities helps to unintentionally incentivize crypto companies to serve a country from offshore, according to the Coinbase CEO. Armstrong added that people had lost tens of billions of dollars in crypto assets because countries have remained oblivious to the practices their subjects have fallen victim to abroad.
Armstrong added that a collaborative effort from regulators, consumers, policymakers, and companies remains necessary from global financial markets, particularly those from G20 countries, to help achieve proper crypto regulation. Policymakers have complex and divergent issues to resolve. Nevertheless, Armstrong has expressed optimism for significant progress in 2023 on the crypto regulation front.