Coinbase proposes a new federal regulator for cryptocurrencies

Coinbase chief Brian Armstrong proposed that the US authorities form a federal agency with powers over digital assets at the federal level.

The cryptoeconomy needs regulatory clarity now. Here, we lay out @brian_armstrong‘s op-ed from @WSJ.

A thread 🧵…

— Coinbase (@coinbase) October 14, 2021

The initiative arose after the exchange’s decision not to launch crypto-savings accounts due to concerns raised by the SEC. Earlier, the regulator warned Coinbase of possible legal action.

The clash prompted the company to develop a plan for a federal regulatory framework for consideration by US lawmakers.

The finalised Coinbase plan offers a radical overhaul of US financial regulation and consists of four main pillars:

1. Regulation of digital assets within a new framework — the existing system does not work for decentralised networks. The new agency would support innovation.
2. Appointment of a single regulatory body — the agency would need to establish a new process for registering digital asset marketplaces. A special self-regulatory organisation should also be created.
3. Expansion of rights and protections for digital asset holders, including protection from fraud and market manipulation.
4. Facilitating functional interoperability and fair competition — digital asset marketplaces should interact with products and services in the crypto-economy. This is a condition for fair competition, responsible innovation and developer support.

The proposals are based on feedback from more than 75 meetings with lawmakers, industry representatives and the academic community.

“We have concluded that there is little point in trying to transform any regulator due to the peculiarities of the technology underlying digital assets”, said Faryar Shirzad, Coinbase’s Policy Director, according to The Block.

According to the executive, the proposals would be referred to the SEC for consideration. Shirzad explained that they do not apply to Bitcoin and Ethereum (the Commission did not classify them as securities) and truly decentralised organisations. In the latter case, “there is nothing to regulate”, he added.

Coinbase proposed joining the discussion on the proposals on GitHub.

Earlier, Gary Gensler’s September Senate testimony was described as an announcement of a “crusade” against bitcoin exchanges. In it, he pledged to crack down on platforms that listed unregistered securities.

A month earlier, the official urged crypto exchanges to engage in dialogue.

In October, Gensler stated that the Commission has no plans to ban cryptocurrencies, citing that this is the prerogative of Congress. Earlier, he confirmed the conditions under which the SEC would approve a Bitcoin-ETF.

Recent media reports say the Biden administration is considering issuing an order for federal agencies, which would obligate them to study the crypto industry and present relevant supervisory recommendations.

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