Coinbase released a digital asset policy proposal Thursday that the company hopes will animate discussions about how regulators should adapt to cryptocurrencies.
The company said the framework was developed in response to two burgeoning trends in the financial industry that Coinbase believes could create “more efficient, transparent, and cost-effective processes” compared to those in traditional financial markets, the company wrote in the proposal.
Those trends are the adaptation of blockchain-enabled technology, and the creation of a digitally native asset class that “empowers distinct economic use cases,” Coinbase added in a blog post.
“We understand that high-level proposals don’t become law overnight — nor should they. But what they can do is evolve the debate in ways that are helpful for everyone, including members of Congress who are increasingly focusing on this area,” the blog reads.
While discussions about how crypto regulations could work are not new, they have accelerated since the pandemic began.
On Tuesday, the International Monetary Fund warned in its annual financial stability report that cryptocurrencies have the power to destabilize the global financial system if regulations remain barren.
Financial leaders from around the globe seem to be echoing the same call. Jon Cunliffe, the deputy governor of the Bank of England, told an audience at SIBOS on Wednesday that “Financial stability risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace.”
Meanwhile, US regulators are seeking to close-off cryptocurrencies from the so called “wash-sale” rules that allow investors to claim a tax deduction for securities sold at a loss.
Currently, most of the rules that govern securities exchanges were drafted in the 1930s, which Coinbase argues makes them “contemplate (the) technological revolution” of cryptocurrencies.
“Not only are some of the financial rules of a paper-based system obsolete, but they are also an encumbrance to innovation, inclusion, and social welfare,” Coinbase said.
Marketplace that fosters innovations
In order to create a marketplace that fosters innovation, Coinbase says regulators need to draft laws with four pillars in mind:
- Regulating cryptocurrencies in a separate framework from securities
- Designate a single regulator for cryptocurrencies
- Protecting and empowering digital asset holders
- Promote interoperability and fair competition.
These pillars would “help the public and the businesses that will provide the services for this new, thriving financial ecosystem, regulatory certainty for everyone is required,” Coinbase added.
Coinbase is open-sourcing its regulatory framework via GitHub for interested parties to comment on.
Meanwhile, US regulators are continuing to push forward with meetings and hearings about how to adapt to cryptocurrencies.
On Thursday, US lawmakers in the House Financial Services Subcommittee on Oversight and Investigations met to discuss how cashless economies can impact disadvantaged communities and people.
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