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Investing.com – Brian Armstrong, chief executive of Coinbase (NASDAQ:), hopes policymakers will prioritize oversight of centralized industry players following the fall of FTX. He cited cryptocurrency exchanges, custodians and stablecoin issuers as needing greater regulatory clarity, adding that these operators carry “the greatest risk of harm to consumers.”
His comments follow the collapse of FTX which lost its customers’ money, estimated at $8 billion. In his “hundreds of meetings” with policy makers, Armstrong hopes FTX can be the catalyst that pushes through the right legislation. Stablecoins can be regulated under traditional financial services laws, such as a state fiduciary charter, according to Armstrong.
“You shouldn’t need to be a bank to issue stablecoins unless you want to do fractional-reserve lending. Banking regulations are the strictest because they come with permission to lend customer funds But many stablecoin issuers will be satisfied with being forced to hold assets 1-to-1 and only being allowed to invest in high-quality assets like treasury bills.”
For depositories and exchanges, legislators can also examine the regulatory framework for traditional financial services. This could include strict know-your-customer procedures and anti-money laundering policies, standards for safeguarding customer funds, as well as “strong consumer protection rules, such as risk disclosure, and transparency around fees and conflicts of interest”.
“Right now, bad actors are causing too many distractions and we all need to take responsibility for improving the situation. I’m optimistic that we can make meaningful progress on the above in 2023 and push through a cryptocurrency legislation.