Coinbase Proposes Crypto Regulation Framework to US Officials

Coinbase Prepares Regulatory Framework for Cryptocurrency Exchanges

Coinbase, a leading cryptocurrency trading platform, is proactively seeking to influence emerging regulations concerning exchanges like its own. During an interview with TechCrunch Editor-in-Chief Matthew Panzarino at TechCrunch Disrupt 2021, CEO and founder Brian Armstrong disclosed the company’s preparation of a draft regulatory framework.

This framework is intended for consideration by federal lawmakers and is slated for distribution within the coming month. Armstrong stated that Coinbase aims to serve as a knowledgeable advisor and advocate in the creation of sensible U.S. regulations for the cryptocurrency space.

Industry Input and Regulatory Gaps

The development of this proposal comes as regulators commonly solicit feedback from industry stakeholders when establishing new rules. This is particularly crucial in rapidly evolving technological sectors where market advancements often outpace existing regulatory structures.

Armstrong revealed that he has been repeatedly requested by government officials to provide such a proposal. He explained that during visits to Washington D.C., he is frequently asked if Coinbase has a draft or proposal for federal regulation.

Currently, Coinbase navigates a complex landscape of 50 different state regulators for money transmission licenses, alongside similar requirements for lending, and oversight from agencies like FINCEN, the SEC, CFTC, IRS, Treasury, and OFAC.

Seeking a Unified Federal Approach

Armstrong expressed a preference for a comprehensive federal framework. This would streamline operations by reducing the burden of complying with individual state-level rules and agencies.

However, he acknowledged that any proposal from Coinbase would represent only one component of a broader solution. This solution will necessitate input from other cryptocurrency industry participants and consideration of existing relevant regulations.

He emphasized the need for lawmakers to actively engage with the private sector and gain a thorough understanding of the opportunities presented by cryptocurrency.

Recent SEC Conflict and Product Rollback

Coinbase recently encountered a dispute with the Securities and Exchange Commission (SEC) regarding its planned ‘Lend’ product. This product would have allowed users to earn interest on their cryptocurrency holdings through staking.

The SEC indicated it might pursue legal action, classifying the product as a security subject to regulation. Consequently, Coinbase temporarily suspended the launch of the ‘Lend’ product after publicly disclosing the SEC’s concerns and its own uncertainty regarding potential regulatory repercussions.

Armstrong believes that a collaborative approach, incorporating industry expertise, is essential for crafting effective and forward-thinking cryptocurrency regulations.