Coinbase, America’s leading exchange, has released a comprehensive proposal about how the country should regulate cryptocurrency markets and the industry.
The company presents a proposal titled “Digital Asset Policy Proposal” and explains how the ecosystem has grown so rapidly that it is crucial to improve the regulatory framework to adapt it to modern society.
Coinbase believes that the crypto ecosystem is so different from modern finance it is impossible to use legal analogies. A new regulatory body that is solely focused on the control of the crypto ecosystem is needed.
The risk of putting all digital assets under the same supervision as before computers is that it will impede the development of this transformative technology and push the United States out of the innovation center of gravity. It is time to establish new laws and oversight mechanisms for digital asset trading, disclosure and regulation.
What is Coinbase Proposing exactly?
Coinbase believes that the American cryptocurrency industry doesn’t need a law, but rather a new, more complicated legal system. The proposal from Coinbase consists of four “Regulatory Pillars.”
A separate framework is needed to regulate digital assets.
Instead of adapting existing laws to an industry that is so young like cryptocurrencies or decentralized products, the US government should develop a legal framework that specifically addresses cryptocurrencies and digital assets. This will allow them to be distinguished from traditional market rules.
Designate One Regulator for Digital Asset Markets
Coinbase explains the same thing as before. Instead of trying to create a synergy among various institutions (e.g. SEC, CFTC and IRS), Coinbase suggests that they should instead try to do so. The government should establish a self-regulatory organisation (SRO), which will be responsible for regulating cryptocurrency.
Protect and empower digital asset holders
Coinbase claims that the government should not only regulate crypto but also create mechanisms to increase security and confidence for users of decentralized products. These proposals include protection from market manipulation, greater efficiency of markets, and increased transparency.
Encourage interoperability and fair competition
Coinbase believes that the Marketplaces of Digital Assets (or MDAs) should be interoperable to other platforms and protocols in order to foster a sustainable growth of the crypto ecosystem.
Coinbase has Merits to Discuss Crypto with US Regulators
Coinbase has a long relationship with the US Government. It is one the oldest US-regulated exchanges, established in 2012 following the success of Kraken.
Coinbase is the only North American exchange that went public. This feat has not been duplicated by any other company.
Coinbase is a strong advocate for exchanges having a cordial relationship to regulators. It has signed lucrative contracts with law enforcement agencies that offer them tools to track crypto transactions.
Despite its merits, it’s hard to believe that the Biden administration would take Coinbase’s proposal seriously. The bureaucratic process for creating a new agency takes too long and is expensive. This would likely lead to political chess as agencies try to protect their power and budget allocations.
Marla Brooks – Financial Analysis
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