Coinbase CEO: Crypto Regulators Should Leave DeFi

Key Points:

• The fall of FTX has forced lawmakers to focus on regulating the crypto business.
• According to CEO Coinbase Armstrong, stablecoins should be regulated first, then centralized exchanges and custodians.
• The stablecoin law could be passed in the first half of next year by adopting regulatory frameworks.

Co-founder and CEO of cryptocurrency exchange Coinbase Brian Armstrong urged regulators to concentrate on centralized organizations rather than decentralized finance (DeFi) initiatives.

Brian Armstrong has asked regulators to focus on centralized crypto organizations and leave DeFi alone when it comes to industry regulation.

It’s best to create regulatory clarity first around centralized actors in crypto (stablecoin issuers, exchanges, and custodians) because this is where we’ve seen the most risk of consumer harm, and pretty much everyone can agree it should be done.

Armstrong wrote in a Dec. 19 blog

Following the fall of FTX, a crypto exchange that filed for bankruptcy protection in November after allegedly abusing billions of dollars in client assets, lawmakers are focused on regulating the crypto business. Prosecutors in the United States charged co-founder and former CEO Sam Bankman-Fried with fraud and money laundering last week.

According to Armstrong, stablecoins should be regulated first, then centralized exchanges and custodians, making room for DeFi to develop.

Regulating stablecoin issuers is a good place to start, because there is broad interest in D.C., and we can get some momentum with a quick win, we don’t need to do anything fancy or crypto-specific here; stablecoins can be regulated under standard financial services laws by using, for instance, a state trust charter or an OCC national trust charter.

Armstrong said

Armstrong predicts a stablecoin law could be passed in the first half of next year by adopting regulatory frameworks from traditional financial services, freeing up regulators to concentrate on the more difficult tasks of developing a regulatory framework for centralized crypto players and determining which digital assets qualify as securities or commodities.

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