Coinbase, a US-based cryptocurrency exchange, has voiced substantial concerns regarding the newly enacted GENIUS Act regulations. These regulations, which became effective in July, have been met with a cautionary stance by the company. Coinbase insists that these rules should strictly follow the parameters set forth by Congress to prevent stifling innovation and undermining the United States’ position in the global cryptocurrency arena.
Textual Interpretation in Regulatory Framework?
Emphasizing the need for a more limited interpretation, Coinbase has submitted a comprehensive response to the US Treasury Department. The exchange advocates for exempting non-financial software, blockchain validators, and open-source protocols from regulatory supervision. This approach, according to Coinbase, aligns with the legislative intent.
“The regulations need to remain faithful to the law’s clear intent,” elaborated Coinbase Policy Director Faryar Shirzad, stressing the importance of making US-based stablecoins leading instruments in global financial transactions.
Coinbase has further argued that restrictions on interest payments should apply only to stablecoin issuers. Loyalty programs run by exchanges or third parties should not fall under this categorization as Congress distinctly drew the line against such interpretations.
How Should Payment Stablecoins be Classified?
Coinbase proposes a reevaluation of how payment stablecoins are treated in terms of taxation and accounting. The company posits that these cryptocurrencies share the stability and utility of fiat currencies, thereby recommending that they be classified as cash equivalents. This would entail that the Treasury Department and IRS implement regulations that are both practical and minimally burdensome for payment stablecoins.
The GENIUS Act marks the first comprehensive regulatory structure at the federal level for stablecoins in the US. This law stipulates that stablecoins be backed by US dollars or similar liquid assets, mandates annual audits for specific issuers, and lays out principles for foreign-issued stablecoins.
Key insights from Coinbase’s appeal include:
- Clear differentiation of software and protocol exemptions from regulatory oversight.
- Pushing for stablecoin classification as cash equivalents to reflect their market role.
- Avoidance of loyalty and reward programs being misconstrued as interest.
Coinbase’s engagement with regulatory bodies exemplifies its proactive stance in shaping cryptocurrency rules. By advocating for measures that promote innovation while staying within legal confines, they underscore their commitment to fostering a balanced regulatory landscape in the United States.
