Financial authorities shouldn’t intervene in this situation for decentralized crypto goods like decentralized financing (DeFi), decentralized autonomous organizations (DAOs), and self-custodial wallets since “transparency are built in by default” in these products, he claimed.
Decentralized protocols should be viewed as being akin to “open source code,” and self-custodial wallets should be regarded as “software companies.”
The CEO of Coinbase stated that decentralized stablecoins are a “good place to start” in efforts to regulate the sector.
By declaring themselves to be a state trust or holding an OCC national trust license, stablecoin issuers might be subject to regulation under “ordinary financial services regulations.” This would necessitate that these companies keep assets in a 1:1 ratio with a focus on treasuries and other high-quality assets.
Armstrong argued for the need for stablecoin issuers to comply with a number of standards, including yearly audits, SOC compliance, and a “blacklist capacity to fulfill sanctions requirements.”
He emphasized the need for greater clarification regarding which assets in the cryptocurrency market are commodities and which are securities after controlling stablecoins.
“Perhaps the most complex point that needs clarity is around which crypto assets are commodities and which are securities. The CFTC and SEC have been debating this issue in the U.S. for several years now, but unfortunately, they haven’t provided any clarity to the market,” wrote Armstrong.
The CEO of Coinbase urged Congress to intervene and enact legislation that would use a modified Howey test to categorize cryptocurrencies.