Coinbase Exec: US Congress Needs to ‘Step Up’ Its Crypto Regulatory Efforts

Coinbase, the world’s second-largest cryptocurrency exchange by trading volume, would be willing to register its dormant broker dealers with the U.S. Securities and Exchange Commission (SEC) as long as lawmakers provide clear direction for the crypto industry, said Faryar Shirzad, chief policy officer at the centralized exchange.

“We need Congress to step up,” Shirzad said on CoinDesk TV’s “First Mover” on Friday. “We've got bipartisan leaders in the House, Senate [and] all relevant committees … who've all stepped up and said, ‘we want to bring crypto under regulation.’”

In contrast, Securities and Exchange Commission Chairman Gary Gensler has said the federal agency’s existing rules already provide clear regulations for crypto platforms that issue tokens, and that the agency’s securities laws could be applied directly to the crypto markets.

But Shirzad pointed out that “every crypto token is not a security,” and that the debate over whether “every crypto is a security or not is a very American one.” According to him, the U.S. approach to crypto regulation does not mirror what is going on in other countries and thus could be stifling innovation.

“There’s no other country in the world that has as fragmented a regulatory system as we do,” he said, noting that the U.S. is perhaps among the only countries in the world to use two different market regulators, one for commodities – the Commodity Futures Trading Commission (CFTC) – and a securities regulator, the SEC.

“In every other country in the world … there’s one market regulator,” Shirzad said. “They provide ground rules around what kind of investor protections [and] market integrity rules you need, and the crypto ecosystem can operate under those rules,” he said, giving crypto companies the ability to “to innovate, grow, develop, [and] provide products that customers want, while ensuring customers get the protections and disclosures that they need.”

Whether the U.S.-based centralized exchange would register with the SEC as a regulated exchange, Shirzad said that it “would love to register” the two dormant broken dealers it owns but that “the reality is there is no path to registration.”

“It’s not a matter of coming in and talking, filling out a form and registering,” he said. “‘Has anyone successfully done it? What would you register as? How do you overcome the fact that tokenized assets are not allowed to be traded either on a broker dealer or on a national stock exchange? What’s the workaround to allow crypto markets generally or tokenized debt or equity to trade in an SEC authorized way?’”

But at the moment, Shirzad said, “there is no clarity and no path on any of that.”

Is staking in danger?

Shirzad said he does not know whether all staking is under attack in the U.S., but he sees a need for the U.S. to at least push to be a competitive crypto player.

“It’s really important for the United States to remain a part of the crypto ecosystem,” Shirzad said, and that if the U.S. were to fall behind in crypto innovation, “it would be catastrophic for American national security interests.”

But crypto could face challenges as the SEC continues to trudge along its regulatory enforcement roll.

Last week, the agency settled with and fined crypto exchange Kraken, ordering it to close down its staking-as-a-service platform to its U.S. customers. Nearly a week later, it said it would plan to bring enforcement action against stablecoin issuer Paxos for the alleged sale of an unregistered security token, Binance USD (BUSD). This week, the agency said it would be suing stablecoin issuer Terraform Labs and its founder, Do Kwon, for misleading investors.

For the time being, Shirzad said “It's only fair that all of us who are trying to build this really dynamic and transformational ecosystem should have some clear rules for the road,” he said.

Read more: Terraform Labs, Do Kwon Transferred More Than 10K Bitcoin Out of Platform Accounts After Collapse: SEC