Coinbase Tells Congress We Need Clarity Not More Regulators

During the March 14th US Congress hearing where cryptocurrency and ICO regulations were being discussed, Coinbase's chief and legal risk officer Mike Lempres gave a written testimony stating increased regulations were not necessary.

The Coinbase team is no stranger to these type of hearings as they regularly meet with policymakers and have testified several times. Coinbase was founded in 2012 with a mission to create an open financial system for the world. Their user base has grown into over 20 million customers, they store more than $20 billion worth of cryptocurrencies, and have traded over $150 billion in assets.

Lempres spoke in front of the House Committee on Financial Services, Subcommittee on Capital Markets, Securities, and Investments, expressing the need to ensure the progress of blockchain and cryptocurrency technologies not be stifled due to regulations.

We believe there is no need for Congress to create a new regulator or a new regulatory scheme because federal regulators already have sufficient authority to regulate this space effectively.

There are currently 4 regulatory agencies already in place that are sufficient enough to protect the markets; the SEC, CFTC, FinCEN, and the FTC. Lempres also mentioned in his testimony how negatively the constant uncertainty surrounding regulatory matters was hurting the growth of the market. People are afraid to invest out of the fear they will get burned by constant regulation changes. This has a great risk for new projects and technologies moving overseas, leaving the United States behind.

The main dilemma seems to be the inconsistency when it comes to the classification of cryptocurrencies among the different bodies of regulation.

• the SEC says these assets, particularly ICO’s, are probably securities
• the CFTC says tokens are commodities, unless they are securities
• the IRS says they are property
• FinCEN says tokens are money
• other agencies see tokens through their own lens

It is still unsure if a crypto token is a commodity, currency, property, or a security. Different classifications have very different tax implementations. The IRS considers crypto assets as property and require very specific, almost to the point of impossible guidelines for active investors and traders.

The SEC wants to call crypto tokens securities, which still would have adverse tax treatment. This level of uncertainty is driving away potential investors, thus slowing down the United States in the technology race. Coinbase asks for all 4 agencies to coordinate and come up with a unified solution that will make it easier for investors and companies to be compliant.

ICOs

Coinbase currently only offers BTC, ETH, LTC, and BCH. Their reasoning for only offering these specific assets is that regulators have determined they are virtual currencies and not securities. Coinbase does not have a license to trade securities. They do not offer or trade ICO's but state they believe ICO's have great potential when it comes to efficient and effective funding for new and innovative projects. Lempres did bring up the recent trend of growing scams in ICO's and expressed that Coinbase does welcome regulation when it comes to weeding out bad players.

In order to fully enable ICO’s, investors must know they have the same kinds of protections when investing in ICOs as they have when investing in more traditional securities. Investors must have confidence in the integrity of the market. For this reason, we support enforcement actions where they are necessary to weed out bad actors and to protect investors.

Watch the full Congressional hearing

Coinbase Full Written Testimony

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