Coinbase, a prominent US-based cryptocurrency exchange, has expressed significant concerns regarding the recently implemented GENIUS Act regulations. These rules, which took effect in July, have been met with a cautious approach by the company. Coinbase maintains that these regulations should adhere strictly to the boundaries established by Congress to avoid hindering innovation and compromising the United States' standing in the global cryptocurrency market.
Textual Interpretation in Regulatory Framework
Coinbase has submitted a detailed response to the US Treasury Department, advocating for a more constrained interpretation of the regulations. The exchange proposes that non-financial software, blockchain validators, and open-source protocols be exempt from regulatory oversight. Coinbase asserts that this approach is consistent with the legislative intent behind the act.
“The regulations need to remain faithful to the law’s clear intent,” stated Coinbase Policy Director Faryar Shirzad, emphasizing the importance of establishing US-based stablecoins as leading instruments in global financial transactions.
Furthermore, Coinbase argues that any restrictions on interest payments should exclusively apply to stablecoin issuers. The company believes that loyalty programs operated by exchanges or third parties should not be subject to this classification, as Congress explicitly excluded such interpretations.
Classification of Payment Stablecoins
Coinbase recommends a reassessment of how payment stablecoins are treated for taxation and accounting purposes. The company contends that these cryptocurrencies possess the stability and utility characteristic of fiat currencies. Consequently, Coinbase suggests they should be classified as cash equivalents. This would necessitate that the Treasury Department and IRS implement regulations that are both practical and minimally burdensome for payment stablecoins.
The GENIUS Act represents the first comprehensive federal regulatory framework for stablecoins in the United States. This legislation mandates that stablecoins be backed by US dollars or comparable liquid assets, requires annual audits for specific issuers, and outlines principles for the regulation of foreign-issued stablecoins.
Key points from Coinbase's appeal include:
- •A call for clear differentiation of software and protocol exemptions from regulatory oversight.
- •Advocacy for the classification of stablecoins as cash equivalents to accurately reflect their market function.
- •Emphasis on preventing loyalty and reward programs from being misconstrued as interest payments.
Coinbase's active engagement with regulatory bodies highlights its proactive strategy in influencing cryptocurrency regulations. By championing measures that foster innovation while remaining within legal boundaries, the company underscores its commitment to cultivating a balanced regulatory environment in the United States.