Coinbase CEO discusses new staking service and reactions to regulatory hurdles
"The financial system needs to be updated. It's slow, it's archaic," Armstrong told Bankless.
Brian Armstrong, the CEO of Coinbase, told a recent episode of the Bankless podcast that cryptocurrency is the key to updating the current financial system. Armstrong said in the podcast that traditional system is outdated and slow, with laws and codes that are decades old.
“The financial system needs to be updated. It’s slow, it’s archaic. The code is from 40 years ago like the laws are from 100 years ago,” Armstrong said.
He added that despite recent setbacks by FTX and Silvergate, broader trust within crypto has never been higher.
“I believe crypto can update the financial system […] if we elect representatives in a democracy who believe in our values around economic freedom, then all of these regulatory challenges will end up in a good place,” Armstrong predicted.
Coinbase and changes to staking
On several recent changes to Coinbase, Anderson said he was happy to defend the staking mechanism in court. “Coinbase’s staking program is not a security. We feel comfortable defending that in any way that’s needed,” Armstrong told the podcast.
Coinbase recently announced updates to its staking service a month after U.S. regulators targeted similar products. In an email to users, the cryptocurrency exchange clarified that staking would continue, highlighting that rewards are earned through protocols and not directly from Coinbase. This distinction is essential to U.S. regulators like the SEC, who have raised concerns about the potential for such services to be classified as securities. The update includes changes in how staked assets can be transferred and sold.
He added that Coinbase was also considering several derivatives options. “We’ve been working with the CFTC here to get our derivatives platform going,” he said.
On the current regulatory market and broader contagion spreading throughout the industry, Anderson told the Bankless podcast he believes that risk can be mitigated with proper controls, which centralized exchanges are particularly adept at.
“I think that sort of contagion can be pretty well mitigated with just reasonable risk controls,” Anderson said.
However, Anderson added that he predicts that regulators will use stablecoins as a proxy to argue that liquidity issues in them threaten the traditional financial system.
“The biggest thing that they’re concerned about is that there’ll be some massive withdrawal from the banks of stablecoins and that will create liquidity issues in the traditional financial system.”
He said that this threatens the cultural ecosystem of crypto in the US: “What’s really worse is that we’re having this environment of regulation by enforcement,” Anderson said, characterized by “random” subpoenas and law enforcement.
“A lot of crypto entrepreneurs are now saying, okay, well, I guess I need to build my company offshore in another country, because outside the US. Because the environment is too dangerous in the US. They can’t afford the legal bills, and that’s pretty dangerous.”
Like other crypto entrepreneurs, he singled out other jurisdictions like the UK, the UAE, Singapore, and South Korea that will likely pick up the slack in the event of over-regulation in the US.
The full Bankless podcast episode can be seen here.