Home » Coinbase: Brian Armstrong gives his vision for effective regulation of cryptocurrencies

Coinbase: Brian Armstrong gives his vision for effective regulation of cryptocurrencies

by v

Brian Armstrong, CEO of Coinbase, shared his vision for a coherent regulation of the cryptocurrency ecosystem. In particular, we find the importance of distinguishing between centralized players and the technology itself.

Coinbase CEO calls for sound regulation

Brian Armonstrong, the CEO of Coinbase, has published a Twitter thread followed by a blog post in which he gives his vision of what effective regulation of the cryptocurrency ecosystem should be:

The first thing that stands out is the distinction that is made between technology on the one hand, and centralised actors on the other. It thus calls for regulatory clarity:

“It’s best to create regulatory clarity around centralized crypto players first […], because that’s where we’ve seen the most risk of consumer harm, and pretty much everyone can agree that should be done. “

It’s a quote that directly echoes current events. Indeed, Brian Armstrong points to the legal uncertainty and the tendency of regulators to focus on their own national market, which contributes to the emergence of offshore companies, like FTX in the Bahamas. This makes it difficult to prosecute such companies if they do not comply with a country’s rules.

In the same vein, he encourages the US to adopt regulation at the national level, so as to create harmony between states, drawing a parallel with MiCA regulation in Europe.

The case of DeFi

A big part of the Coinbase CEO’s argument also concerns the regulation of decentralised finance (DeFi). Overall, the message could not be clearer and can be summed up simply:

“Let innovation happen in decentralised crypto “

Indeed, Brian Armstrong points out that the open source nature of DeFi and Web3 creates, through smart contracts, an environment where you just have to trust the mathematical laws. Similarly, the rise of decentralised autonomous organisations (DAOs) will eventually promote on-chain accounting, and with it, transparency.

Rethinking the Howey test

The Howey test is used to determine whether a financial asset is a commodity or a financial security. But Brian Armstrong shows its limitations, as even the Commodity Futures Trading Commission (CTFC) and the Securities and Exchange Commission (SEC) can’t agree when it comes to crypto-currencies.

He therefore proposes to revise this test to fit our ecosystem. The CEO of Coinbase indicates that often one of the conditions invoked to classify a cryptocurrency as a financial security is the investment in the expectation of a financial return. However, this reasoning can also apply to precious metals or works of art, which does not make them financial securities for all that.

Brian Armstrong says that Coinbase is working on its own analysis of ecosystem assets, and that the company can approach regulators to help set standards.

Related Posts

Leave a Comment