Coinbase CEO: Regulate CEXs, not DeFi

Coinbase co-founder and chief executive Brian Armstrong urged regulators to focus on centralized exchanges (CEX), not the DeFi segment.

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

“First, the best way is to bring regulatory clarity to the centralized sector of the industry (issuers of stablecoins, exchanges and custodians), since that is where the greatest risk of harm to users lies,” he wrote.

According to Armstrong, non-custodial wallet providers should be regulated like software developers, not as financial services. He explains this by noting that the former do not handle client funds.

The creation of decentralised protocols should be equivalent to publishing open-source code and, accordingly, protected by freedom of speech laws.

“Stablecoins can be regulated under standard financial-services laws,” emphasised the head of Coinbase.

In his view, if the regulatory framework from the traditional market is borrowed, a law on “stablecoins” could be passed in the first half of next year. Regulators will have the opportunity to focus on more complex tasks, including crafting rules for centralized players in the crypto industry and classifying digital assets as securities and commodities.

Armstrong noted that Coinbase lists assets only after thorough due diligence.

He argued that regulation in foreign markets is no less important than in the United States.

“It’s no secret that there are still a number of dubious players in the crypto industry who do not play by the rules,” the head of the American exchange noted. “And we will continue to encounter problems in this space until regulatory clarity and a level playing field emerge”.

Earlier, Brian Armstrong excluded the impact of the FTX collapse on Coinbase. He stressed that the crisis surrounding Sam Bankman-Fried’s business empire was the result of “risky business practices” and “misuse of customer funds”.

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