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Following the lead of Coinbase, Ripple and Binance have now set out their views on how regulators should approach the booming crypto sector. Ripple is calling for rulemakers to use the current regulatory framework, while Binance releases its ten fundamental rights for crypto users that regulation should acknowledge.
Last month, Coinbase issued a discussion paper setting out arguments in favour of a new, specialised crypto regulator in the U.S.
In the paper, the crypto exchange calls for digital assets to be regulated under a separate framework from the existing financial system, as well as arguing that there should be one regulator at the federal level to do this.
Countering this vision, crypto platform Ripple argues the existing U.S. financial regulatory frameworks can be utilized to regulate cryptocurrencies.
Under the complex and multi-layered regulatory framework, cryptocurrency-related activities are subject to the jurisdiction of numerous federal agencies. However, most of the regulatory uncertainty for market participants comes from the determination of whether a digital asset is considered to be a commodity or a security.
Last December, the former leadership of the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, claiming that the XRP token the company sold over seven years was not a commodity, as the company had stated, but security.
Market players saw the move as an attack against the whole crypto industry, setting a worrying industry-wide precedent for any company working with a digital asset.
The SEC’s suit against Ripple is still ongoing, with the crypto platform repeatedly confirming that it has no plans to settle the case.
Ripple now argues that the existing federal commodity market regulatory framework, supervised by the Commodity Futures Trading Commission (CFTC), is well suited to regulate digital commodity markets.
“The CFTC's commodity market regulation is well established and widely accepted, and provides robust customer protection including core principles, segregation of customer assets, and legal certainty within the federal bankruptcy regime,” the company said.
The paper also stresses that any legislation or policy framework should be based on an active dialogue between regulators and market participants.
A good form of such a dialogue could be formed through regulatory sandboxes, according to the company.
“The current uncertainty in the U.S. regulatory landscape discourages innovation and could cause a “brain drain” in the cryptocurrency and blockchain space. In order to incentivize innovation and inform the development of a clear and consistent regulatory framework for cryptocurrencies, we believe innovation sandboxes should be encouraged.”
As crypto companies gear up for regulation, Binance, the largest crypto exchange by daily volume, has established its 10 Fundamental Rights for Crypto Users to ensure everyone can have access to crypto and end-users remain at the top of the minds of both industry participants and any future regulations.
The exchange, which has a decentralized model, with no official jurisdictional headquarters so as not to be subject to a central authority, has recently announced that it is taking a U-turn and will seek a payments license in Singapore.
In a September blog post, the company said “we recognize what it means to be the industry leader versus simply being the largest player in the industry.” As the cryptocurrencies market has grown too big for regulators to ignore, Binance said it will work with regulators to become a licensed financial institution with centralized headquarters.
Now the crypto platform has said it is working with regulators and policymakers to support “a global framework that protects users without limiting growth and innovation.”
Among the fundamental rights, the company establishes the responsibility of industry participants to engage with policymakers to shape new standards for crypto-assets.
“Smart regulation encourages innovation and helps keep users safe,” the exchange said.
Additionally, crypto platforms should implement know your customer (KYC) processes to prevent financial crimes, acknowledge privacy as a human right and make sure personal data is strictly protected.
Finally, the company stresses: “Crypto regulation is coming. And we believe it will change the industry for the better.
“Users have the right to share their voice on how the industry should evolve with their blockchain platform of choice.”
