The CEO and co-founder of the US’s largest cryptocurrency exchange, Coinbase has called for clearer and sensible regulations of the crypto industry for consumer protection.
The blog post came as a response to the recent collapse of one of the leading cryptocurrency exchanges, FTX, which saw many investors losing their funds.
In the post, Armstrong noted the necessity of being clear about why the event happened, what needed to be changed and how to prevent future occurrences.
“FTX’s downfall appears to be the result of risky, unethical business practices, including conflicts of interest between deeply intertwined entities, and decisions to lend customer assets without permission. It’s worth noting that these activities happen in traditional financial markets as well — and in fact, blockchain technology will make it easier to track and prosecute over time,” said Armstrong in the post.
He furthered that the FTX event has prompted calls for more regulation in the crypto industry, with tighter restrictions on access and innovation.
“The problem is that, so far, U.S. regulators have refused to provide clear, sensible regulations for crypto that would protect consumers, crypto regulation in the U.S. has been hard to navigate, and regulators have so far failed to provide a workable framework for how these services can be offered in a safe, transparent way,” wrote Armstrong.
He said that Entrepreneurs who are building decentralized products are afraid of building it in the US due to the fear of prosecution.
FTX was able to do that because it operates in the Bahamas, a country with very little regulatory oversight, regulators never forced FTX to conduct itself the way it did but created a situation where the exchange could take dangerous risks with no repercussions.
Regulators have focused basically on regulation by enforcement by chasing US-based companies for failing to follow the rules while they actually did not establish what these rules are.
“Coinbase itself fell victim to this practice earlier this year, when the SEC accused the company of listing unregistered securities, a charge that we strongly deny,” said Armstrong.
He concluded by calling on the regulators to seize this opportunity to make things better by providing a more enabling environment for the crypto industry in the US.
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