Brian Armstrong, the CEO of Coinbase, has called for regulatory clarity in the US crypto industry. Speaking to The Wall Street Journal, Armstrong stated that there is an ongoing power struggle between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and Coinbase has been “caught in the middle” of this turf war between the agencies.
This struggle between the SEC and CFTC has led to contradictions, with the CFTC claiming certain assets, like Ethereum, to be commodities while the SEC has called them securities. Armstrong believes that until the two agencies can come to an agreement on the status of cryptocurrencies as securities or commodities, regulatory clarity is needed. He further stated that Congress needs to step in and frame legislation to provide this clarity.
However, until Congress provides legislation, the industry will have to rely on case law, which will emerge from lawsuits such as the recent one filed by the SEC against Coinbase. In the lawsuit, the SEC claims that thirteen of the assets listed on Coinbase are securities, which Coinbase rejects.
Armstrong stated that Coinbase reviews tokens carefully before listing and rejects 90% of assets reviewed. The listing process involves a rigorous analysis, and there is a stack of paper for every asset listed on the exchange. Armstrong “feels” that the tokens listed on Coinbase are commodities and not securities.
The exchange constantly asked the SEC for guidance on whether certain tokens were “okay” to be listed, but since Coinbase never received any feedback from the SEC, it had to create its own process. Coinbase has a digital asset listing committee that reviews tokens for listing. The committee considers several factors before approving an asset for listing, including a legal analysis of whether they are commodities or securities.
Armstrong added that Coinbase shared its framework for differentiating between crypto securities and commodities with the SEC before it went public. However, the SEC’s silence forced the exchange to rely on its own listing committee, made up of the “best legal minds in the world.”
Armstrong believes that any clarity from the courts, irrespective of the outcome, will be a “step in the right direction.” He is confident that even if it takes a few years, the US will ultimately reach the “right outcome.” Armstrong believes that this “right outcome” could come from the courts, through Congress legislation, or after the 2024 presidential elections.