Coinbase CEO calls for stricter regulation of centralized crypto actors

Brian Armstrong, CEO of cryptocurrency exchange Coinbase, has called for stricter regulation of centralized crypto actors while advocating for decentralized protocols to be allowed to grow and mature. In a recent blog post, Armstrong argued that open-source code and smart contracts provide "the ultimate form of disclosure," and that on-chain transparency is built in through cryptography. He added that decentralized protocols, which do not involve intermediaries, should therefore be largely left alone.

On the other hand, Armstrong believes that additional transparency and disclosure checks are necessary for centralized actors, as there is a higher risk of consumer harm due to the involvement of humans. He suggested that the U.S. should start with stablecoin regulation, enforcing the implementation of a state trust charter or an OCC national trust charter, and that stablecoin issuers should be required to meet basic cybersecurity standards and establish a blacklisting procedure to comply with sanction requirements.

Once stablecoin regulation is in place, Armstrong advises targeting exchanges and custodians with a federal licensing and registration regime, as well as strengthening consumer protection rules and prohibiting market manipulation tactics. He also suggested that the U.S. Congress should require the CFTC and SEC to categorize the top 100 cryptocurrencies by market cap as either securities or commodities.

Armstrong further urged regulators from all countries to consider the potential impact that a foreign business may have on their citizens, and to enforce laws not just domestically but also with companies abroad serving their citizens. He suggested the creation of regulatory sandboxes for decentralized protocols to test and iterate without fear of regulatory repercussions, and encouraged regulators to work with the industry to develop a framework for decentralized protocols.

Overall, Armstrong emphasized the importance of protecting consumers and ensuring they have a good understanding of the risks and benefits of decentralized protocols. He called for a "light touch" approach to regulation that allows the industry to continue to innovate. The comments come as the market continues to recover from the damage caused by the collapse of FTX, and as U.S. Senator Bill Hagerty's Stablecoin Transparency Act is expected to pass into the Senate in the coming months.