In its defense of the attributes of stablecoins, Coinbase pointed out the core uses of the tokens. The exchange said they find immense uses in circumventing the inefficiencies in the traditional banking world.
American publicly traded digital currency trading platform, Coinbase Global Inc (NASDAQ: COIN) has come out to advocate for more proactive and functional regulation in the digital currency ecosystem. The trading platform took to its official Twitter handle to lament the regulation-by-enforcement approach of the United States Securities and Exchange Commission (SEC) on major crypto players.
According to Coinbase, the crackdown on Paxos Trust, the issuer of the Binance USD (BUSD) stablecoin creates a negative uncertainty that is not ideal for the industry. Coinbase said while it does not understand what aspect of the BUSD issuance the SEC is concerned about, it said it is certain stablecoins are not securities.
“This week the NYDFS ordered US-based Paxos to stop issuing US dollar-denominated stablecoin BUSD and the SEC issued a Wells notice to Paxos. We don’t know what aspects of BUSD might be of interest to the SEC. What we do know: stablecoins are not securities,” Coinbase said in the tweet.
As a major partner in the Center Consortium, alongside Circle, the firm behind the USD Coin (USDC), Coinbase shared insights into the stablecoin and how it does not qualify for security. The trading platform pointed out that the token is issued and backed on a 1:1 basis with the United States dollar.
Coinbase pointed out that the reserve for the USDC like other assets is denominated in physical cash, Treasury Bills, and other cash equivalent funds that back up the full value in circulation. Coinbase affirmed that for every USDC in circulation, there’s always a cash equivalent backing in.
The trading platform makes insinuations that show that just like other stablecoins, the USDC coin’s adoption is driven by the transparency drawn from disclosures of its reserve backing.
Coinbase on the Use of Stablecoins like USDC
In its defense of the attributes of stablecoins, Coinbase pointed out the core uses of the tokens. The exchange said they find immense uses in circumventing the inefficiencies in the traditional banking world. The trading platform also highlighted how stablecoins like USDC are invaluable to merchants for faster settlement.
“Why use a stablecoin like USDC? The value of fiat-pegged stablecoins stays stable over time, and their digital properties make them faster, more efficient, and more accessible ways to conduct commerce. Their stable value over time is also why they’re not used as investments,” the exchange said.
Coinbase’s submission points to the fact that since stablecoins are not used as investments, then their tag as security is wrong. Just as the firm has always done, it advocated for a more dialogue-based approach to regulating the industry.
The exchange wants the SEC to step up its role by providing guidance for key players in the ecosystem. The exchange fears that failure to do this can be disadvantageous to consumers and the US economy as a whole.
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Coinbase, one of the world’s most prominent cryptocurrency exchanges, has called out for proactive regulations in the wake of increased scrutiny of stablecoins in the industry. This is according to Coinbase’s general counsel Brian Brooks, who made the suggestive remarks during his keynote address at the Money 20/20 USA virtual summit last week.
Brooks was discussing the recent swift crackdown on several high-profile stable coins, including the well-known Tether and USDC. He argued that such measures were counterproductive, and instead suggested the implementation of “forward-looking” regulations for the industry instead.
It is important to note that Coinbase was an a key contributor to the United States’ updated version of the ‘Bank Secrecy Act’. This law, which was introduced in 1970, aimed to combat money laundering in the country. As part of the new regulations, both exchanges and consumers alike have to perform regular Know Your Customer (KYC) and Anti-Money Laundering (AML) checks.
Brooks believes this extra regulatory oversight, while important, and not enough to keep the industry secure. He advocates for a preemptive approach, where policymakers and innovators come together to project future challenges and devise problem-solving solutions. In doing so, there is potential to avoid similar, disruptive governmental actions in the future.
Furthermore, Coinbase supports other initiatives intended to increase the legal legitimacy of cryptocurrency. They have also joined the worldwide ChangeNOW Alliance, a platform designed to foster compliance with regulations in different jurisdictions.
All in all, it appears that Coinbase is taking a proactive approach to the situation. As cryptocurrency continues to gain both popularity and acceptance, additional regulatory measures can help the industry become more secure and level the playing field for everyone involved. It will be interesting to see how the industry changes in response.