Coinbase CEO Proposes Digital Asset Regulations

• Brian Armstrong, CEO of Coinbase, has announced that the prominent crypto exchange has published its “Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership” in an effort to guide U.S. regulators on how to best oversee the blossoming industry.

• In an op-ed in the Wall Street Journal, Armstrong detailed the current state of the cryptocurrency industry along with the threat that heavy handed and inconsistent regulation poses to the many entrepreneurs and businesses in the field.

• “First, the government should regulate digital assets under a new framework. Our existing financial regulatory system doesn’t work effectively for the open, decentralized networks that crypto has created,” said Armstrong. He was quick to point out the inefficiencies of historical regulation methods being applied to digital assets such as the Howey test, which is the result of a 1946 Supreme Court decision about whether or not contracts to sell or manage citrus groves could be considered securities.

• Armstrong vocalized the need for the designation of one single regulatory body to oversee digital asset markets. Currently the Commody Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and the Internal Revenue Service (IRS) all have differing statements and rulings regarding the new asset class.

• The CEO also called for a clear definition of what a digital asset is, providing a possible answer as a financial asset issued and transferred using distributed ledger or blockchain technology, where “financial asset” would include an asset whose primary use is as a payment instrument, medium of exchange, a store of value, or otherwise as a financial interest.

• The proposal aims to ensure transparency for all market participants, protect investors against fraud and market manipulation, and promote efficiency and market resiliency.