In the words of Brian Armstrong, “With regulatory clarity for centralized actors, a level playing field, and decentralized crypto innovation preserved, crypto can bring enormous benefits to the world.”
Brian Armstrong, the CEO of Coinbase, outlined a blueprint for regulating centralized actors and stablecoin issuers in the wake of FTX’s collapse.
Armstrong stated that centralized exchanges and custodians should focus on implementing strict Know-Your-Customer (KYC) and Anti Money Laundering (AML) protocols. He added that these platforms should create minimum security standards to protect clients' assets. He also proposed banning market manipulation tactics and enforcing strong consumer protection rules.
Meanwhile, he argued that decentralized products should be left alone by regulators. He backed this statement by saying that decentralized protocols impose transparency “by default.”
“Decentralized arrangements (DAOs, DeFi, etc) do not involve intermediaries, and have their own, in some ways superior, set of protections.”
The CEO of Coinbase reasoned that it is not necessary to have banks as stablecoin issuers. These firms can be regulated by registering themselves as state trust charters or OCC national trust charters. He also suggested that a stablecoin law should mandate these firms to undergo strict annual audits.
Armstrong also referred to the long-standing debate between the SEC and the CFTC on classifying tokens as securities or commodities. He suggested that Congress should step in and pass legislation to clear up confusion. He proposed updating the Howey Test to include four more prongs for the classification of coins.
He concluded by affirming that he remains positive about the future of crypto regulation.
“I'm optimistic that we can make significant progress on the above in 2023 and pass crypto legislation.”
