Coinbase CEO spoke about the likely strengthening of control over cryptocurrency users in the United States
Coinbase CEO Brian Armstrong spoke about his concerns about the alleged measures of the administration of US President Donald trump to strengthen control over cryptocurrency users.
"Last week, we heard rumors that the Finance Minister [Stephen] Mnuchin plans in a hurry to establish some new regulations in relation to local wallet before the end of his term. I am afraid that this action will have undesirable side effects, and I would like to share my concerns, " Armstrong writes.
He expects that the proposed regulatory measures will mean that financial institutions such as Coinbase will have to verify the owners of non-custodial wallets before they can withdraw cryptocurrency to such a wallet.
Armstrong believes that the idea looks reasonable on the surface, but is a failure in essence, since collecting information about the recipient of a transaction is impractical in many cases. He explains that many users send cryptocurrency to smart contract addresses for use in DeFi applications, but such applications are not always associated with an individual or legal entity that can be identified.
In addition, a number of users spend cryptocurrency to pay for goods and services on the Internet. "Does it make sense to require a customer to help verify a business before they can buy a product there?" the coinbase CEO asks.
Also, according to him, a number of transactions are sent to residents of developing countries, where it may be impossible to collect a sufficient amount of identification information. Some of them live in poverty, do not have a permanent address or identification document, Armstrong notes.
"Many recipients (in the US and abroad) who value their financial privacy may simply not want to hand over additional identification documents to various companies that may have them stolen. These additional difficulties will kill many new scenarios for using cryptocurrencies, " he adds.
The CEO of Coinbase expects that due to the new requirements, people will withdraw less cryptocurrency to their own wallets, as a result of which American financial services will be cut off from the broader cryptocurrency economy. He also admits that users will more often turn to offshore unregulated platforms, and the long-term effect of these measures will be the risk of losing the US status of a financial center.
"If such measures of regulation of the cryptocurrency industry are approved, it will be a terrible legacy and will have a lasting negative impact on the United States. Last week, we, along with other crypto companies and investors, sent a letter to the Ministry of justice to clarify these and other concerns," Armstrong concludes.
Reasonable concerns
The measures described by the CEO of Coinbase correspond to the worst-case scenario that was considered by industry participants after the financial action task Force (FATF) established requirements for the exchange of data of clients of crypto companies last year.
According to Jacob Farber, partner of the law firm Ouroboros LLP, until that time, the cryptocurrency industry was regulated mainly at its points of contact with traditional Finance. According to him, establishing control over users ' identities at the stage of transferring cryptocurrencies significantly expands regulation and, "more importantly, changes what cryptocurrencies can be." He calls Armstrong's concerns justified.
Even before today's announcement by the CEO of Coinbase, other organizations began to work to defend the right of users to independently store cryptocurrencies. On November 18, the Coin Center published an article about the undesirable consequences of restricting such wallets, and the blockchain Association also in November presented a 50-page guide for lawmakers on this topic.
Shortly before this, it became known that one of the Dutch exchanges began to request screenshots of wallets from customers for withdrawing funds, explaining this by the requirements of the updated legislation.