Coinbase’s CEO, Brian Armstrong, proposed a plan on Monday to bring regulatory stability to the crypto industry. He believes the law will encourage the adoption of stablecoins.
Stablecoin issuer regulation: a positive development
Armstrong has argued in a blog post that regulation should start with centralized entities like stablecoin issuers, exchanges, and custodians because they pose the most risk to consumers.
In his view, most of the risk to customers occurs here, and everyone appears to agree that something must be done about it.
He suggested that issuing rules for stablecoins would be a good development, and this is the simplest option.
He said that the approach need not be overly hard because stablecoins can be efficiently regulated by already financial services regulations, such as state or national trust charters.
He continued by saying that international companies operating in the United States that serve citizens of countries with cryptocurrency legislation should be subject to domestic enforcement of those restrictions.
Armstrong noted that despite having its headquarters in the Bahamas, FTX complies with the laws of the countries in which its customers reside. He stated that cryptocurrencies’ potential for on-chain accounting, public and transparent smart contracts and self-custodial wallets present a chance to enact even more stringent consumer safeguards.
In the United States, Senator Bill Hagerty has introduced the Stablecoin Transparency Act, which has passed the House of Representatives and will likely be taken up by the Senate in the coming months. He argued that stablecoin issuers don’t have to be banks unless they want to use fractional reserves or deal in risky assets.
However, they should still be obliged to fulfill basic cybersecurity standards and build up a blacklisting mechanism in order to meet sanction requirements. After the problem of stablecoin regulation is solved, he suggests that authorities move on to crypto exchanges and custodians.
Brian Armstrong proposes the implementation of federal licensing
The CEO of Coinbase has recommended a federal licensing and registration mechanism for exchanges and custodians to serve customers in this market legally, as well as tougher consumer protection measures and outright prohibition of market manipulation activities.
He acknowledged that the courts are still figuring out whether or not cryptocurrencies are commodities or securities. He also argued that the United States Congress should require the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to classify the top 100 cryptocurrencies by market capitalization as either commodities or securities.
He predicted that millions of crypto assets would be issued in the future and that if issuers disagreed with the research, the courts could settle the outliers. Regardless, he said that this labeled data set would be useful for the industry.
Considering the international scope of cryptocurrency-based businesses, he also urged governments to assess the potential harm that an out-of-country firm could be causing their citizens.