By Jeff Benson
4 min read
Everyone's got a different idea of how crypto regulations should look. After watching crypto exchanges Coinbase, FTX, and Binance put forth their visions, the venture capital firm responsible for funding many of the space's startups and unicorns has produced its own recommendations.
In a document titled "How to Build a Better Internet: 10 Principles for World Leaders Shaping the Future of Web3," Andreessen Horowitz, or a16z, argues for a multi-stakeholder approach to regulation that includes governments, businesses, and civil society groups. It also argues for stablecoins—fiat-pegged cryptocurrencies that offer easy entry into decentralized protocols but that have been eyed warily by U.S. officials—to be "well-regulated" and then put to work improving the financial system.
"Decentralized financial technologies already handle hundreds of billions in transaction volume every day and provide compelling evidence that there is a pathway for instantaneous, global, 24/7 financial rails," writes a16z in the report. "Stablecoins are a basic building block on which this financial innovation is occurring."
Andreessen also recommends inter-country collaboration on crypto standards, tax codes that are more transparent, and "targeted" regulatory regimes that recognize the diversity of Web3 technologies. "Treating all digital assets in the same way is analogous to having a single legal regime to cover stocks, real estate, cars, art, watches, and trading cards," it states.
Last October, one of the recipients of a16z's largesse, Coinbase, proposed policy guidelines specific to the U.S. market. Its proposal called for a "single federal regulator" to oversee token and market registrations and enforce consumer protection. That plan, perceived to require the creation of a new regulatory body, drew guffaws from Robinhood Chief Legal Officer Dan Gallagher, who called it "one of the stupidest ideas I've heard in this space in a long time." Coinbase told Decrypt the plan is "regulator agnostic" and wouldn't necessarily require a new agency.
Later that fall, rival exchange FTX released its own policy document that was primarily focused on U.S. regulations but which could apply to other jurisdictions. It called for a "primary market regulator" that could span both spot and derivatives markets; in the U.S. the Securities and Exchange Commission mostly oversees the former while the Commodity Futures Trading Commission is responsible for the latter.
Sandwiched in between those two in-depth proposals came Binance's crypto bill of rights. In it, the exchange—which was hounded by national regulators throughout 2021—made the case for regulation in terse terms. For example, it said, "Marketplaces that offer derivative instruments should be subject to the appropriate regulations. This ensures all users meet eligibility requirements and that their transactions are fairly settled." It did not expand on what it meant by "appropriate."
Other crypto firms have also issued guidelines, including Ripple Labs, which is currently fighting a $2.3 billion lawsuit brought against it and its executives by the SEC.
As with the Binance recommendations, the Andreessen Horowitz proposal requires the reader to paint some of the picture. Though a16z's own position is unambiguous given the size of its investments in the space, the reader is left to wonder about the difference between its version of "well-regulated" stablecoins and Jerome Powell's call for an "appropriate regulatory framework" for the pegged assets.
Nonetheless, the a16z document, though aimed at "world leaders" instead of the U.S., signals mounting desire for American policymakers and legislators to create clear frameworks for companies to legally create, sell, or hold tokens and other digital assets.
Many have blamed the SEC for their confusion, believing that the agency has stepped up enforcement actions against crypto projects under Chairman Gary Gensler without providing coherent guidance. In a December interview with Decrypt, Blockchain Association Executive Director Kristin Smith said of Gensler, "We agree with some of the things that he wants to see, like investor protection and market integrity… I think where we continue to differ with him is the sort of idea that the laws are super clear."
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