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FutureStarrCoinbase CEO Speaks Out: Why Crypto Needs Clear Regulations
Coinbase CEO Brian Armstrong recently spoke with Bloomberg TV to emphasize why crypto needs clear regulations. He mentioned how the U.S. was falling behind other nations when it comes to regulatory reform efforts.
That means cryptocurrency companies and users must be protected against fraud, manipulation and any illegal behavior that might damage or undermine the industry. Trust-building regulations designed to eliminate bad actors will help the sector flourish and grow over time.
Cryptocurrencies are a dynamic asset class with high degree of volatility, meaning their values can change considerably within an hour and frequently drop by hundreds of percent.
As exchanges like Coinbase face increased competition from rival exchanges, it's essential they take steps to protect their customers against fraud. This includes making sure only users with valid passwords and two-factor authentication codes can gain entry to their accounts; additionally, this should prevent requests for remote access of wallets or devices, and protect personal information as much as possible.
Fraud can be an extremely profitable enterprise for criminals. By using stolen private keys or seed phrases to access user's Coinbase accounts and take control of their crypto assets - often worth several hundred dollars - thieves can sell or trade these coins back into the market for a profit and potentially increase their earnings significantly.
Though companies must strive to protect their users, it is also critical that they take steps to comply with state and federal regulations. That is why Coinbase recently reached an agreement with New York regulators over failing to monitor and report suspicious transactions on time.
The settlement requires the company to improve their security practices, such as investing an extra $50 million into improving its transaction monitoring system. Furthermore, an independent reviewer must conduct an annual examination of compliance practices at their company.
Coinbase remains a crucial player in the cryptocurrency space despite recent issues, serving as one of the leading centralized exchanges and decentralized wallet services.
Coinbase's CEO Brian Armstrong suggested last week at an event in London that it could leave the United States if regulatory climate does not improve, which includes more clarity from SEC on cryptocurrency regulation issues.
The cryptocurrency market has been beset with various issues, from fraud to regulatory uncertainty. Addressing these challenges will restore trust in the industry and encourage more people to invest in crypto assets.
One of the key challenges that must be met in the cryptocurrency space is transparency, including how frequently and in what format organizations disclose information related to their cryptocurrency operations.
As crypto adoption and integration accelerates, organizations must accurately report on what cryptocurrency they own and how it is being utilized within their enterprise. This will allow them to provide accurate reporting to interested third parties such as investors, regulators, or the general public.
Additionally, these reporting requirements allow tax authorities to monitor the proceeds received from trading crypto assets and ensure that taxes are appropriately paid.
Information provided will allow European governments to more quickly identify tax loopholes and other potential issues in the crypto space, making it simpler to address these concerns without losing revenue for European nations.
One way that companies can maintain transparency is to make their proof of reserves (PoR) public, giving individuals peace of mind about the security of their deposits prior to investing.
Transparency is of great significance in the cryptocurrency space for several reasons, most importantly helping investors understand what risks they're taking when investing. Furthermore, transparency will allow people to detect fraud or scams in this industry and stay safe.
To meet their goals, companies must comply with both state laws and industry standards that regulate their industry, to safeguard both themselves as well as their customers and stakeholders.
Companies subject to regulation should adhere to stringent compliance guidelines, such as possessing an official license or registration and providing a safe working environment. Furthermore, these companies should regularly reveal their policies and procedures.
Cryptocurrency regulation must take a coordinated, global approach in order to minimize risks to all parties involved. Its systemic components include regulatory agencies that enact rules (regulators), controlled entities which must abide by them (regulated entities), and measures taken by authorities in response to noncompliance (controls).
Regulation is crucial in any financial market or asset, as it reduces risks to users while encouraging innovation while discouraging abuse that could destabilise markets.
As cryptocurrency investment continues to skyrocket, more coordinated global regulation will become necessary to protect users and ensure safe industries for people to rely upon.
Regulation in the cryptocurrency space is especially vital, given its esoteric technology and lack of clear regulations that have left companies like Coinbase operating without clear guidelines to navigate regulatory hurdles. Without clear regulations in place, companies such as these linger in regulatory limbo.
Armstrong believes that without clear, supportive regulations in place for American industries like semiconductors and 5G networks, they will fall behind those in other nations who have implemented more favorable regulations. He noted how these industries expanded rapidly overseas before eventually finding their place here in America.
Cryptocurrencies have, until now, relied on third-party exchanges and custodians who may be vulnerable to fraud and manipulation. Therefore, one of the primary goals of cryptocurrency should be removing such third party dependence and giving customers control of their wallets directly.
Regulators need to impose the same level of transparency and accountability on crypto assets that they do with stocks and bonds if the market is going to thrive. This will reduce investor fear of these digital currencies, making them an attractive long-term investment choice.
Regulation can also bring maturity, stability and fungibility to compliant virtual assets - increasing their appeal with both institutional and individual investors - helping change perceptions about cryptocurrencies as a commodity that could potentially be used illegally.
Effective cryptocurrency regulation will enhance user experiences by eliminating third-party intermediaries and making transactions more transparent. It will also foster consumer trust while encouraging the creation of decentralized financial systems with self-custodial wallets rather than central exchanges.
The cryptocurrency industry is an unpredictable frontier that has experienced its fair share of highs and lows. One notable event was TerraUSD's spectacular crash back in May; this event galvanised calls for regulations to help tame this wild world.
Regulations are an invaluable tool of government that enable them to maintain control of businesses and hold them accountable, with the intention of preventing fraud, providing transparency, ensuring consumer and investor protection and collecting evidence for prosecutions.
Armstrong believes regulations can be advantageous to the cryptocurrency industry as they bring order out of chaos, providing a safer system that may increase adoption rates of cryptocurrencies.
He asserts that it will be essential for regulators to focus on stabilizing stablecoins - blockchain tokens whose value is pegged against dollars or other fiat currencies - by maintaining large reserves of cash or treasuries as collateral for their peg.
Critics often accuse stablecoins of being nothing more than Ponzi schemes; however, Armstrong asserts that they are not securities and Coinbase is ready to defend its staking product in court if needed.
To be truly disruptive, the cryptocurrency industry requires an even playing field and this can only come about with appropriate regulation. Otherwise, its growth would never have an effect on global economies.
Armstrong believes the United States lags behind other countries when it comes to creating regulations and guidelines for cryptocurrency, which is why he urges Congress to increase their efforts in this regard.
He proposes that the SEC should extend investor protections it has given securities market investors to cryptocurrency investments as well. Furthermore, regulators should work closely with industry participants to make sure all adhere to similar rules.
Armstrong remains optimistic about the industry and hopes that U.S. can come together in order to support it; he, however, fears that their current war against cryptocurrency by the government could cause irreparable damage to our financial system.