Coinbase CEO Brian Armstrong has pushed for stricter regulations on centralized crypto actors, but says decentralized protocols should be allowed to flourish given that open-source code and smart contracts are alrea“the ultimate form of disclosure.”
Armstrong shared his views on cryptocurrency regulation in a Dec. 20 Coinbase blog where he proposed how regulators can help “restore trust” and move the industry forward as the market continues to recover from the damage done by FTX and its shock collapse.
But decentralized protocols aren’t part of that equation, the Coinbase CEO emphasized.
“Decentralized arrangements do not involve intermediaries [and] open-source code and smart contracts are “the ultimate form of disclosure,” Armstrong explained, adding that on-chain, “transparency is built in by default” in a “cryptographically provable way” and as such should be largely left alone.
8/ To get there we need to preserve the innovation potential of this technology. Regulation should focus on intermediaries (the centralized actors in cryptocurrency), where additional transparency and disclosure is needed.
— Brian Armstrong (@brian_armstrong) December 20, 2022
The Coinbase CEO said that “additional transparency and disclosure” checks are needed for centralized actors because humans are involved, with Armstrong hoping FTX’s fall “will be the catalyst we need to finally get new legislation passed.”
Exchanges, custodians and stablecoin issuers are “where we’ve seen the most risk of consumer harm, and pretty much everyone can agree [that regulation] should be done,” he added.
Armstrong advised the U.S. starts with the stablecoin regulation pursuant to standard financial services laws, suggesting that regulators enforce the implementation of a state trust charter or an OCC national trust charter.
At this current point in time, U.S. Senator Bill Hagerty has introduced the Stablecoin Transparency Act that is expected to soon pass into the Senate in the coming months.
Armstrong added that stablecoin issuers shouldn’t have to be banks unless they want fractional reserves or to invest in risker assets but issuers should nonetheless have to satisfy “basic cybersecurity standards” and establish a blacklisting procedure in order to comply with sanction requirements.
Once stablecoin regulation is sorted out, Armstrong suggests that regulators target cryptocurrency exchanges and custodians.
The Coinbase CEO suggested that…
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