Coinbase takes matters into its own hands

We wrote about Coinbase's extraordinary efforts to engage the U.S. Securities and Exchange Commission (SEC) before launching what amounts to an interest-bearing offering.

This simple concept is widely used in the industry. Digital asset holders utterly lend their cryptocurrency to provide liquidity over a certain period and then get paid interest for that duration.

It is the same as lending dollars or euros to a bank/fund and receiving an annual interest rate.

The SEC threatened to sue Coinbase if the company launched the product. Ironic, even, is the widespread use of this type of digital asset lending in the industry.

This type of lending is available to both accredited and non-accredited investors. Investors can earn interest rates many times greater than the ones they get from their bank accounts.

They will typically see an appreciation in digital assets relative to their fiat currencies due to artificially low-interest rates.

Coinbase finally gave up after nearly a decade of cooperation with the Financial Industry Regulatory Authority, the SEC, and the Commodity Futures Trading Commission (CFTC).

Coinbase was proactive and always at the forefront of engaging regulators. It followed the rules and always sought clarification. But, despite all its efforts, the SEC has not provided clear guidance to the Blockchain industry regarding digital assets.

Coinbase's proposed framework

Coinbase decided to take matters into its own hands came up with its framework. Coinbase presented four regulatory pillars days ago on which a new framework could be created for digital asset regulation.

One: Create a separate framework to regulate digital assets.

Two: Designate one regulator to oversee digital asset markets.

Three: Protect and empower digital asset holders.

Four: Encourage interoperability, fair competition.

These are all reasonable points. These points are very sensible and should be taken into consideration. Some elements will.

However, item two will be blocked by the current administration - creating a new regulator to supervise digital asset markets. It is, unfortunately, the most important.

The current U.S. securities laws were created in the 1930s. It is not surprising that they aren't well-structured to accommodate cryptocurrencies and all the decentralized financial instruments developed in real-time.

Of course, it's no one's to blame. It's impossible to imagine that 1933 regulators and policymakers would have been able to anticipate the internet and blockchain technology: and that's precisely the point.

Employing a technology that has built-in economic incentives is a way to go beyond the existing regulatory framework.

With the present-day administration trying to slow everybody down - while the SEC and CFTC are fighting between themselves for the right to regulate the Blockchain industry - it is clear that a completely different framework, one that is digital-first, would be beneficial to all participants.

Coinbase's team is not naïve. Behind closed doors, We all know, and they know they won't get the digital-first regulator they want. But that's not what the point is. Coinbase is placing a stake to get a response from SEC. They did it professionally and thoughtfully.

They're not the only ones. Andreessen Horowitz, the largest crypto venture capital fund ever raised $2.2 billion, did something similar.

The industry is stepping up for change. This is not a one-issue vote for many. Businesses and decentralized organizations need to operate, innovate, thrive, and create jobs within a clear regulatory framework.

All investors should have the opportunity to participate in a generation's most significant wealth creation event, the next internet generation.

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