In October, American cryptocurrency broker Coinbase proposed what it saw as the ideal solution to the regulatory problem in crypto: a new federal regulatory body.
Dan Gallagher, General Counsel for Robinhood, Coinbase's adversary, believes it's not feasible. “It's one of the stupidest ideas I've heard in this industry lately,” he told Georgetown University Financial Markets Quality conference attendees.
He said attempts to transfer authority from agencies such as the Securities and Exchange Commission (or SEC) and the Commodity Futures Trading Commission (CFTC) would likely be incomplete and would only add more people.
Coinbase's “Digital Asset Policy Proposal ”, published on October 14, presented a way to minimize the number of agencies that crypto market participants may face.
"To avoid fragmented and inconsistent regulatory oversight of these unique and competing innovations, responsibility over the cryptoactive markets must be assigned to a single federal regulator," he said. "His authority would include a new registration process designed for digital asset markets (MDAs) and providing adequate data to inform buyers of digital assets."
In response to Gallagher's comments, Coinbase issued a new statement:
We welcome any discussion of how to reform a system that is not adequate when it comes to crypto. However, to be clear, our proposal never called for a new regulator: it is regulator agnostic.
It calls for crypto-focused proposals, not the use of old precedents for new technology. We welcome the debate and if others have concrete ideas, share them. There is space for everyone to contribute.
Currently, several agencies are eyeing the cryptoactive sector.
The SEC is charged with regulating securities (tradable investments in companies trying to generate profits).
In October, Gary Gensler, chairman of the SEC, declared that Coinbase had “dozens of tokens that can be securities” even if it is not licensed to operate as a stockbroker.
There is also the CFTC. In October, during his confirmation hearing, President Rostin Behnam urged the Senate to be "the chief prosecutor" for digital assets, despite his agency's traditional mandate to regulate derivatives markets, not commodities themselves.
And a variety of other government officials are frequently involved in the industry, including the Office of Currency Control (OCC), banking regulator formerly headed by former Coinbase executive Brian Brooks, as well as the Financial Crimes Combat Network (FinCEN).
In addition, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Bank, and the OCC have joined an interagency team to coordinate crypto policies for banks.
Gallagher, who served as the SEC's representative during the Obama administration, cited well-intentioned legislation introduced after the financial crisis between 2008 and 2009, precipitated by defaults on high-risk mortgages.
“[The Dodd-Frank Act] started limiting the number of agencies and providing clear jurisdiction, so they got rid of one agency and added three,” he said.
“So we ended up with a balance of two more [agencies] after Dodd-Frank and with even more confusion about jurisdiction. The idea of adding a new regulator is completely ridiculous.”
Gallagher was referring to the Dodd-Frank Consumer Protection and Wall Street Reform Act, which ended the Treasury Department's Office of Oversight of Savings and Loan Associations (OTS), merging its tasks with the OCC, FDIC, and Federal Reserve and the newly created Department of Financial Consumer Protection (CFPB).
Dodd-Frank also created the Financial Stability Oversight Board (FSOC) and the Office of Financial Research (OFR).
Robinhood and Coinbase were targeted for being the two largest platforms for acquiring cryptocurrencies in the US. However, both took different steps.
Brian Armstrong, CEO of Coinbase, promised to list every legal asset, prompting the broker to quickly add dozens of new currencies and tokens this year.
In contrast, Christine Brown, chief operating officer of Robinhood Crypto insisted on a more cautious approach that limits the trading app to just seven cryptoactives.
Last week, she told Decrypt : "We want to make sure we're working on evaluating everything very well from a regulatory perspective."
Even if Coinbase's plans are “ridiculous”, other people are thinking about the juggling crypto participants, as well as possible loopholes in the current environment.
In testimony to the US Congressional Board of Economic Committee this Wednesday, Tim Massad, a researcher at the Harvard Kennedy School, told lawmakers: “The CFTC can regulate bitcoin futures the same way it regulates cattle futures, but the CFTC does not regulate the purchase and sale of cows. Nobody regulates the buying and selling of bitcoin beyond the states – that's a very light approach.”
*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co .
Robinhood Executive post criticizes Coinbase's proposed regulation: "Ridiculous" first appeared in Bitcoin Portal .