Coinbase CEO Brian Armstrong has suggested that regulation by enforcement is forcing the industry offshore, but his comments have agitated sections of the crypto community. Armstrong’s comments came in a Twitter thread on Tuesday in which the founder railed against the current political and regulatory climate in the U.S. That was enough to trigger anger from a number of quarters.
In recent years the U.S. technology manufacturing industry has found itself playing second fiddle to rivals in Asia including China, Taiwan and South Korea. Armstrong sees a parallel within the cryptocurrency sector. As Armstrong argues the U.S. is in danger of being left behind and weakened due to overbearing regulation.
“One of the strongest policy arguments for cryptocurrency is that it’s a national security issue. The US missed on semiconductors and 5G which is now largely manufactured offshore,” said Armstrong. “It can’t afford to have cryptocurrency go offshore as well.”
He further warned that “if the SEC is able to prevail” in its lawsuit over XRP, more enforcement will be carried out against crypto firms. The securities watchdog recently took action against Kraken over the cryptocurrency exchange’s staking program, and Paxos over its issuance of stablecoin Binance USD (BUSD). Furthermore, SEC Chairman Gary Gensler believes that all crypto tokens other than bitcoin (BTC) are securities. Citing the SEC’s enforcement-centric approach to regulating the crypto industry, Garlinghouse opined: The macro headline for me is this is not a healthy way to regulate an industry.
Garlinghouse explained that when he first got involved in the tech industry in the late 1990s, “some were saying the internet should be banned.” He continued: “They were saying how the internet is being used for illicit purposes, but the U.S. government said: ‘no, no, no, we are going to create a framework.’ And that allowed entrepreneurs, that allowed investors to come in and look at the benefits to the United States on a geopolitical basis.”
According to the Coinbase chief, “Regulation by enforcement has a terrible chilling effect,” and, “we’ve already seen a huge amount of crypto talent, asset issuers, and startups go offshore.” Armstrong didn’t offer specific examples to back his claims, and what he was referring to remains unclear. That said, his reference to “offshore” crypto did prick the ears of a number of Twitter users.
As one Twitter user questioned, “Isn’t the point of crypto to be free of regulation, free of country limits, payment systems for the world, no matter who you are or where you’re from?” While those ideals may be widely shared in the community, the reality for centralized exchanges and Armstrong is that they have to be based somewhere, and Coinbase is headquartered in the U.S.