Coinbase secures a Virtual Asset Service Provider (VASP) license in Ireland as regulatory turf wars stifle the progress of U.S. crypto legislation.
The Irish approval will allow Coinbase to offer Europeans retail trading through Coinbase Europe Limited and institutional crypto custody services through Coinbase Custody International, even as it seeks to bring clarity to the U.S. regulatory framework.
Coinbase Passes Central Bank Review
In a blog post, Coinbase said that the new registration follows the Irish Central Bank’s earlier approval of the company as an Electronic Money Institution (EMI). This EMI authorization allowed Coinbase to issue digital money and provide digital payment services in Ireland.
The VASP registration scheme, first introduced in 2021, requires digital asset companies to comply with the Criminal Justice Money Laundering and Terrorist Financing Act 2010. The central bank will review a firm’s money-laundering and anti-terrorism protests as part of the approval process.
Coinbase views regulation of the industry as an enabler for crypto’s growth, setting clear ground rules that will create an environment which encourages innovation and strengthens trust in the sector,” said Nana Murugesan, a senior Coinbase executive.
Coinbase CEO Makes Case for Incremental Regulation in the US
Even as Coinbase expands its European operations, its CEO Brian Armstrong believes incremental wins on the regulatory front are preferable to waiting for comprehensive laws to be passed.
In a recent blog post, Armstrong said that early regulation must target crypto companies with the most potential to inflict consumer harm. These include centralized exchanges, stablecoin issuers, and digital asset custodians.
Stablecoin issuers should undergo robust annual audits to ensure that they segregate customer and user funds and have enough money to honor withdrawals 1:1. They must also comply with a minimum level of cybersecurity hygiene and maintain a blacklist of sanctioned entities.
Regulation around exchanges needs to consider measures to protect client assets and prevent market fraud and manipulation, the Coinbase head argues. There should also be a single licensing regime for each major global jurisdiction, such as the EU and the U.S., that allows an exchange to serve customers anywhere in the region. Regulators must also compel crypto exchanges to have policies to identify and prevent entities engaged in money laundering and terrorism from using their platforms.
The Coinbase CEO also offers ideas on determining whether a crypto asset is a security through a modified version of the Howey Test.
Under this modified version, if the proceeds from a crypto asset sale are not used to build a new project, and the asset is not controlled by nor does it accrue profit through its issuer, it shouldn’t be considered a security.
Crypto Lawmaker Hopes Regulatory Turf Wars Will Cease
The security vs. commodity debate is at the heart of a regulatory tussle between U.S. lawmakers and agencies around crypto regulation. Former FTX CEO Sam Bankman-Fried favored the Digital Commodities Consumer Protection Act that would grant the Commodities and Futures Trading Commission jurisdiction over the asset class.
Now, the bill’s co-author Sen. John Boozman has called for the heads of the Securities and Exchange Commission and the CFTC to approve the bill that has been clamoring for lawmakers’ attention since Aug. 2022.
In a recent interview with Fortune, the Arkansas lawmaker said, “We’ve got two very capable people in charge of the SEC and the CFTC,” Boozman. “I want both of them to sign off that this would be effective regulation.”
CFTC chair Rostin Behnam argued on Dec. 1, 2022, at a Senate Agriculture Committee hearing that, even though the bill would need to be amended after the FTX collapse, earlier passage could have prevented the company’s failure. SEC chair Gary Gensler has argued that the bill is “too light-touch.”
Boozman predicts that many more congressional committees would likely want to review the bill to create a more broadly-focused regulatory regime. So the bill’s passage will probably be a “messy” process, unlikely to conclude soon.
However, Boozman suggests that the delay is a reasonable price to pay to create broader regulation that keeps crypto companies stateside and protects user assets.
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BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.