Coinbase Open Sources Crypto Proposal to Biden and Congress
US’ biggest crypto exchange has put forward a proposal on a new crypto regulatory framework with it published on Github, the open source repository.
Coinbase asks all to contribute any changes or recommendations to the establishment of a federal crypto regulator as well as a self-regulating crypto organization (SRO).
“Our financial regulatory system is predicated on the ongoing existence of a series of separate financial market intermediaries — exchanges, transfer agents, clearing houses, custodians, and traditional brokers — because it never contemplated that distributed ledger and blockchain technology could exist.
A new framework for how we regulate digital assets will ensure that innovation can occur in ways that are not hampered by the difficulty of transitioning from our legacy market structure,” says Faryar Shirzad, Chief Policy Officer at Coinbase.
Rather than having regulators from different other industries compete with each other on which part of crypto they should carve within their own jurisdiction, the proposal recommend a new federal agency with oversight over the entire crypto industry.
“To avoid fragmented and inconsistent regulatory oversight of these unique and concurrent innovations, responsibility over digital asset markets should be assigned to a single federal regulator,”Shirzad said, adding:
“Its authority would include a new registration process established for entities that serve as marketplaces for digital assets (MDAs) and an appropriate disclosure regime to inform purchasers of digital assets.
Platforms and services that do not custody or otherwise control the assets of a customer — including miners, stakers and developers — would need to be treated differently.”
It also treats crypto as a new industry distinct from others due to its natively digital nature which allows new capabilities to codify trust, replacing many regulations that deal with fiduciary relationships.
However in instances where there are such fiduciary relationships, like with stablecoins, it recommends extended disclosure requirements. While in contrast for a project that is not fully decentralized but is moving towards it, it suggests more limited disclosure.
This nuanced and categoric approach under one framework and regulator can provide the clarity the industry and investors need, while also facilitating a speedier response in a fast moving field.
As it stands, the proposal is a high level blueprint offering the chance to look anew at century old laws that to this space are the equivalent of the bronze age with the 70s massive mainframes and IBM dominance being ancient times.
An update is now widely recognized as necessary with Clare Cole, FCA’s Director of Market Oversight, stating last month that following a review:
“Everyone agrees – investors, advisors, regulators, banks, companies – that there is a need for reform.”
The new and sui jeneris nature of crypto, which can be a currency, a commodity, a synthetic, a payment system, a database, or indeed a picture, provides the opportunity to move forward with such reforms in a way that is acceptable to the public and thus is willingly abided.
Because the current approach of the regulators of other industries carving up the crypto industry in a 19th century style land grab, isn’t working and won’t work due to fundamental differences in substance – constant blockchain disclosure or code ‘custodians’ that replace trust – that arise due to the nature of cryptos.
As such, it is time the calls of reform from every corner are heeded and the law is made fit for the 21st century because ultimately the law is by general consent and the current laws do not have the consent of the people since they’re from the bronze age.
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