Harmonized rules at the federal level would be a big win for the industry; many institutional asset managers, such as pension funds, would be more likely to invest in crypto under a uniform regulatory framework. More funds and tokens could launch on exchanges, and big advisory firms may be more inclined to add crypto for clients. It’s a big wish list, and it isn’t unique to Breaking News:Much of the financial industry is anxious about the lack of uniform rules governing crypto assets and trading. As it stands, a patchwork of federal agencies have authority over the industry, including the Securities and Exchange Commission, and Commodities Futures Trading Commission, along with state banking and securities regulators. Newsletter Sign-up
As Coinbase sees it, a new regulator would oversee the full “life cycle” of crypto services, including trading, custody, settlement, and transfers between crypto and “fiat” currencies like the dollar. Coinbase also wants a new Self-Regulatory Organization, or SRO, an industry-backed group that would be tasked with oversight, similar to FINRA or the New York Stock Exchange. “Digital assets should be regulated under a separate policy framework,” said Faryar Shirzad, chief policy officer at Coinbase, in a press conference. Crypto “doesn’t fit neatly within the existing financial system,” he added, and there should be one regulator, supplanting the patchwork of state and federal authorities and rules now in place.
Coinbase would also like a more “robust disclosure regime” for digital assets and derivatives, and the company would like rules to promote “fair competition” and interoperability between crypto-trading platforms and digital wallets. Coinbase (ticker: COIN) issued a policy proposal on Thursday, asking Congress to craft entirely new laws for the industry, including a definition of digital assets and a single regulator that would oversee “Marketplaces for Digital Assets,” or MDAs.
Moreover, the politics of crypto are getting contentious. Democrats are staking out a stricter investor-protection stance, including stiffer regulations on trading activity and coin issuers—particularly “stablecoins” that are viewed as systemic financial threats. Some Republicans, however, want new “safe harbor” laws for token developers, arguing the industry should be allowed to develop without the constant threat of regulatory enforcement actions. Tax-reporting rules are also at stake: Democrats aim to cover broad swaths of the industry, including digital-wallet developers and miners, while Republicans have called for narrower definitions of crypto “brokers” for tax-reporting purposes. Yet getting Congress to create a new crypto czar won’t be easy. Such a role doesn’t exist today for the rest of the financial industry; banks, broker/dealers, advisory firms, and other financial intermediaries all have to abide by a hodgepodge of state and federal agencies and regulations.
A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron’s and MarketWatch writers. The Barron’s Daily
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