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Coinbase Proposes “Realistic Blueprint” For Crypto Regulatory Framework

Following the spectacular collapse of the FTX crypto exchange, the entire digital asset ecosystem was in a panic as the effect spread across the industry. In a move to help address the lack of guidelines in the crypto space, Coinbase recently released a regulatory framework that it hopes will bring clarity to the young industry.

A Realistic Blueprint For The Virtual Asset Industry

Part of the new Coinbase proposal is the legislation of stablecoins, which includes the issuers, custodians, and exchanges in the centralized space. The American crypto exchange recommends the regulation of stablecoins under the standard financial services laws.

This law allows non-banking platforms to issue stablecoins on the condition that they do not use fractional reserve lending. Furthermore, Coinbase noted that bank regulations are stricter because there are procedures to follow to lend out customer deposits to entities.

In addition, the exchange stressed that many stablecoin issuers would agree to hold assets one-on-one, requiring them to invest in quality and stable assets like treasury bonds.

Brian Armstrong, the CEO of Coinbase, tweeted the suggestions as a response to the proposal by Elizabeth Warren on the floor of the US Congress. Warren’s proposal seeks to introduce a bipartisan bill to oversee the crypto space.

However, the proposed bill by Warren has come under scathing criticism from the crypto community because it neglects user privacy in transactions. In a similar move, Sen. Sherrod Brown, the US Senate Banking Committee chair, recently proposed a total ban on the use and trading of digital currencies.

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Despite the above events, Coinbase has urged stablecoin issuers to comply with guidelines and register their services as a state trust. The exchange also encourages them to conduct annual audits, create board-level governance, and follow the foundational cybersecurity values.

The Need For A Licensing Regime

As part of Coinbase’s drive to promote innovation and protect users’ interests, the exchange wants service providers to stick to the traditional financial regulations for centralized exchanges (CEXs) and custodians.

Coinbase suggests establishing a federal licensing and registration body and adopting know-your-customer (KYC) and anti-money laundering rules. In addition, the crypto exchange stressed the need for transparency, risk disclosure, and protecting consumers from any uneventful market situation.

Furthermore, as the debate over whether crypto assets are securities or commodities rages, Coinbase wants Congress to take action and settle the debate.

Interestingly, the exchange created a replica of the Howey Test to see how the industry could be better supervised and enhanced. This involves figuring out the use cases of digital assets and how crypto service providers sell their products for money.

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Meanwhile, Coinbase noted that Congress must, as urgently as possible, direct the SEC and CFTC to publish their classification of the top 100 digital assets by market capitalization within 90 days of the implementation of its proposed legislation.

Additionally, the agencies must declare whether an asset is a commodity, a security, or a stablecoin. Finally, Coinbase wants Congress to outline the uniformity between local and international crypto players regarding regulations.


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Bradley Nelson

Bradley Nelson is a US based cryptocurrency news writer for Tokenhell, he helps readers stay up to date with the latest trends and news from the blockchain and crypto world. Bradley has been a crypto enthusiast since 2018.

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