- Coinbase issued a document directed to US Securities and Exchange Commission and Commodity Futures Trading Commission.
- Exchange argues that crypto industry players should aid regulation, significant progress can be made in 2023.
- Blueprint features a modern day Howey Test to determine whether a cryptocurrency is a security.
- Coinbase believes financial regulators should offer categorization of top 100 cryptocurrencies as security or non security, for clarity.
Coinbase, the largest cryptocurrency exchange, issued a blueprint on regulatory clarity for US financial regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The exchange believes that the United States Congress should require US financial regulators to classify top 100 cryptocurrencies as security or non-security, providing regulatory clarity.
Coinbase urges US Congress to require SEC, CFTC to categorize cryptocurrencies
Coinbase, an American publicly traded company that operates a cryptocurrency exchange platform, published a regulatory blueprint to aid financial regulators in the United States. One of the largest cryptocurrency exchanges by volume, Coinbase issued a document that urges the US Congress to ask US financial regulators, the Securities and Exchange Commission and the Commodities and Futures Trading Commission to classify top 100 cryptocurrencies as security or non-security for clarity.
The trading platform believes stablecoin issuers, exchanges and custodians need to aid regulation by taking the first steps towards a regulatory framework for crypto. Brian Armstrong, CEO of Coinbase, says that he has been in hundreds of meetings with policymakers over the past ten years.
Brian Armstrong believes that the collapse of the FTX exchange will be the catalyst needed to get crypto legislation passed. While the blueprint explains most things from a US lens, Armstrong argues that similar steps are needed from every major financial market around the world, including G20 nations.
Coinbase shares a modern day Howey Test for cryptocurrencies
Coinbase shared the exchange’s version of a modern day Howey Test for cryptocurrencies. In the absence of commentary and regulatory clarity from United States financial regulators, the platform shared the following as a modern day test for cryptocurrencies:
- Was there an investment of money? If the crypto asset issuer hasn't sold the asset for money for the purpose of building a project, it's not a security.
- Is the investment in a common enterprise? For a crypto asset to be a security, it must be controlled and operated by a centralized organization like a company. If a project has become sufficiently decentralized, it's not a security.
- Is there an expectation of profit? If the primary purpose of the crypto asset is some other form of utility (voting, governance, incentivizing actions of a community, etc) then it is very unlikely to be considered a security.
- Are the profits to be derived primarily from the efforts of others? If the expectation of profit primarily comes from participants who are unaffiliated with the issuance of the asset, then the project is sufficiently decentralized and would not be considered a security.
The crypto trading platform believes that the CFTC and the SEC need to offer their categorization of cryptocurrencies, and if issuers disagree they can settle edge cases in the court. This could serve as an important labeled data set for the rest of the industry to follow, as, ultimately, millions of crypto assets will be created.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.