By George Ward
On December 20th, Brian Armstrong, the CEO of Coinbase exchange, in a Coinbase blog post, highlighted ways that watchdogs can restore trust in the crypto industry following the FTX saga.
Armstrong believes that regulators must give DeFi platforms enough room to flourish. This is because smart contracts and open-source codes are the main forms of disclosure.
Armstrong Calls For Strict Regulations On CEX
However, the executive clamored for stricter centralized crypto exchange (CEX) regulations. According to him, decentralized protocols are different from centralized actors.
“Decentralized protocols do not need intermediaries. They have a default on-chain transparency. Hence, they should be left alone,” Armstrong stated.
According to Armstrong, CEX needs extra disclosure and transparency checks due to human involvement as third parties. The executive believes the latest FTX crisis would push regulators to introduce such legislation.
In addition, Armstrong noted that most risks that have affected investors came from stablecoin issuers, exchanges, and custodians. Hence, regulating such entities should not come as a surprise.
Furthermore, the CEO advised US regulators to begin with stablecoin regulation. He stated that regulators could enforce the OCC national or state trust charter.
Meanwhile, Bill Hagerty, a US Senator, has already submitted a proposal for the Stablecoin Transparency Act. Many believe the Act will become law in the next few months.
Surprisingly, Armstrong said stablecoin issuers must not necessarily be banks unless they want to invest in risky assets. However, he said such issuers must meet “fundamental cybersecurity standards.”
Once stablecoin legislation is in place, Armstrong believes that authorities should focus on custodians and crypto exchanges.
Crypto Regulation Needs Collective Effort – Armstrong
In addition to improving consumer safety standards and outlawing market manipulation strategies, Coinbase’s CEO had another proposition. He proposed that regulators develop a nationwide licensing and registration scheme to allow exchanges or custodians to lawfully service clients inside that market.
Furthermore, Armstrong talked about securities and commodities. He acknowledged that the US court is yet to agree on a classification of crypto under each group.
Meanwhile, he opined that Congress could ask the SEC and CFTC to classify the top 100 cryptos by market valuation as commodities or securities.
“If crypto issuers do not agree with the verdict of the SEC and CFTC, the court can settle the dispute. However, this would become a standard that future crypto issuers can follow,” he added.
Armstrong also asked regulators from all nations not to focus on domestic crypto regulations alone. Instead, Armstrong further said that crypto regulation needs collaborative efforts from users, regulators, and policymakers, especially those in the G20 nations.