We need clear rules for crypto to protect American leadership and consumers

Tomorrow I have the honor of testifying on Capitol Hill before the House Committee on Agriculture to share Coinbase’s views on the Digital Asset Market Structure Discussion Draft that House Agriculture Committee Chairman G.T. Thompson and Financial Services Committee Chairman Patrick McHenry released last week, and why we need a clear rulebook for crypto in the US.  Ahead of the hearing, I wanted to preview the three core points I plan to make to our elected officials: (1) the US is falling behind; (2) crypto is solving real-world problems and we need a clear path forward to protect responsible innovation; and (3) the Digital Asset Market Structure Discussion Draft is a strong step forward in providing overdue regulatory clarity. 

The US is falling behind.

Distributed ledger and digital asset technology is, as the White House has stated, critical and foundational. Despite being identified as potentially critical to US economic and national security, the US is pushing the technology and the innovators overseas due to lack of clear rules and regulations for crypto. The rest of the world is not waiting for us, and they are taking advantage of our absence. The European Union, the UK, Australia, Singapore and China - through Hong Kong - just to name a few, are putting in place regulatory frameworks that are creating room for innovation while also protecting consumers. Allowing others to leapfrog the United States in a foundational area of technology is not just bad for our economic future, but also our national security as a broad range of use cases emerge in the years ahead. 

Crypto is solving real-world problems and we need a clear path forward to protect responsible innovation. 

Digital assets are unique and diverse. They are creating new ways to store and transfer value while also making existing systems, like the financial system, better. Today’s digital asset use cases range from cheaper, faster, and more reliable international payments to digital IDs to healthcare records on the blockchain. But digital assets do not collectively fit into any single existing regulatory box: some are commodities, some are securities, some are neither, and some simply don’t map onto existing categories. With more than 20 percent of Americans owning and using crypto, we need a regulatory framework that will protect consumers and enable the critical uses of this new technology to continue and grow.

The Digital Asset Market Structure Discussion Draft is a strong step forward in providing overdue regulatory clarity. 

Congress needs to draw the lines between when digital assets and the technology that underpins them should be regulated as commodities, when they should be regulated as securities, and when financial regulations should not apply or simply would make no sense. As the legislative process unfolds this bill will no doubt evolve, but we believe it already offers a strong foundation on which to build a workable and balanced regulatory framework for crypto innovation within the US.  

In addressing both CFTC and SEC authority, the Discussion Draft builds on existing regulatory frameworks, while also recognizing the unique properties and opportunities of digital assets. It would also provide much-needed Congressional authority and guidance to allow our financial system to evolve. The Discussion Draft also thoughtfully draws from many of the key findings of President Joe Biden’s Executive Order (EO) and the agency reports that came out of the EO, most notably by ensuring that we will have a federal regulatory framework over the spot trading of crypto commodities. Overall, it is a thoughtful effort and represents a major step forward. 

While there are a lot of details still to be ironed out, Coinbase strongly encourages lawmakers from both sides of the aisle to work together and act as soon as possible to continue moving the bill through the legislative process. The bill would establish a strong foundation to ensure robust protections for consumers, investors, and market participants engaged in crypto. Crypto is here to stay, and it’s in America’s best interest that Congress ensure that digital assets are appropriately defined and regulated using a risk-based approach. This bill would be a major step in creating a clear rulebook that will make crypto safer for all Americans and help ensure the US continues to lead on technological innovation.