US must catch up on crypto regulation: Coinbase policy chief

Coinbase (COIN) will serve as the custodian for many of the spot bitcoin ETFs approved by the US Securities and Exchange Commission last week.

Coinbase Chief Policy Officer Faryar Shirzad talks to Yahoo Finance’s Julie Hyman and Brian Sozzi about the endorsement at the World Economic Forum’s annual meeting in Davos, Switzerland.

Shirzad argues the approval will bring new investors into the crypto community and it “puts the SEC on record as blessing an important crypto product.” He goes on to explain that “virtually every G20 economy” has adopted or is in the process of adopting a regulatory framework for crypto, adding that “in a way, the debate in the United States has made the U.S. less relevant made” in regulatory discussions.

Watch the video above to hear why Shirzad is hopeful that one day crypto will be treated like money.

This interview is part of Yahoo Finance’s exclusive coverage of the World Economic Forum in Davos, Switzerland, where our team will talk to top decision-makers as well as prominent leaders in business, finance and politics about the world’s most pressing issues and priorities for the coming year.

Editor’s note: This article was written by Stephanie Mikulich

Video transcript

– The big news, of course, last week on the crypto front when the SEC approved a series of mock Bitcoin ETFs. The custodian for many of those ETFs is Coinbase and Faryar Shirzad, who is Coinbase’s chief policy officer, joins us here in Davos. Thank you very much for being here. We appreciate it.

FARYAR SHIRZAD: Oh. Thanks for having me on.

– So let’s diplomatically say that the SEC has sometimes been at odds with the world of crypto. Do these approvals mark a new chapter there, a new kind of rapprochement, or not?

FARYAR SHIRZAD: Well, in the end the courts had to intervene. And they said quite firmly that the basis for rejecting Grayscale’s application was arbitrary and capricious and an abuse of power. So the agency really didn’t have much leeway except to go ahead and approve the applications.

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But this is a big development. This does two things. One, it brings a whole new range of investors into the crypto economy, which is really exciting.

And it symbolically puts the SEC on record as an important crypto product. And I think both are a big problem.

– In light of this news, what types of questions do you get from world leaders here on the ground about crypto?

FARYAR SHIRZAD: Well, people are watching the developments. But the verdict on crypto is largely delivered by the G20. You have virtually every G20 economy that has adopted or is in the process of adopting some sort of regulatory framework.

So the EU, the UK, Australia, Brazil, Singapore. The world economy moved forward. They are integrating crypto into their economies and into their financial systems.

And in a way, the debate in the United States has made the US less relevant in that discussion. I think countries see an opportunity to be a leader in the next iteration of the Internet Web3. And they benefit from it. And of course we at Coinbase are hopeful that the US will catch up.

– I mean, on a similar note, you know, Davos in some years, recent years when crypto was more at a peak in its cycle, you had crypto stuff all over the place. Here crypto tokens, crypto companies.

Now there are fewer. But to your point, it feels maybe a bit more established. Kind of where are we in that arc of institutionalization, and adoption, kind of growing up in a way?

FARYAR SHIRZAD: Yes, I think that’s right. I think there are a lot more institutional players and mainstream companies, financial companies and non-financial companies entering crypto. So it is less of a mysterious phenomenon.

The trade hype you saw a few years ago is less defining than the sector is. I think the verdict is in that the technology is indisputably an improvement over the traditional financial system. And how it is integrated is actually the question before all of us.

So most central banks are looking at developing some sort of tokenized fiat currency. Most economies are developing rules around crypto trading. Many economies are integrating crypto as a payment mechanism.

And I think that is the story of this Davos and of the year ahead. And I think it’s exciting, much more exciting than we’ve seen in the past. So you mentioned that the US is lagging behind in this area.

So is this still going to be a stumbling block for the US crypto industry? Are you seeing any signs of progress on that front?

FARYAR SHIRZAD: Well, the crypto market in the US is huge, even with that uncertainty. A 52 million Americans who own crypto, this is a large segment of the population. More people have crypto as their own electric vehicles than have union cards. So this is a large part of the American electorate.

And in Congress you have bipartisan support for a lot of constructive crypto legislation. So two committees passed important legislation that we expect to come to the floor in probably Q1. We expect it to pass the House.

And so there are big important bipartisan efforts to provide regulatory clarity. And I think we will get there. Maybe it’s this year, maybe it’s next, but it will happen.

– I had a Davos. I spoke with the Managing Director of the IMF Kristalina Georgieva. And I think she was open in seeing crypto as a good payment mechanism, but stopped short of saying it should be considered money. Do you think it should be considered money? And if not, do you think we’re getting to that point?

FARYAR SHIRZAD: There is no doubt. The ability to move value electronically as easily as sending a text is already embraced by hundreds of millions of people around the world. And governments are now investigating it.

So as policy makers sort of get their minds on crypto, the public gets its minds on crypto as well. And they vote with their feet.

A large part of the world’s population owns crypto. You have trillions of dollars of stablecoin base settlement happening every year.

– But it’s not that easy a lot of the time though, right? I mean, even though it’s supposed to be this frictionless payment, I mean, a lot of the time, it’s still not–

FARYAR SHIRZAD: Yes.

– — If you’re trying to buy or trade, or God forbid, pay for something in Bitcoin, right?

FARYAR SHIRZAD: Yes.

– I mean, when are we going to get to that point?

FARYAR SHIRZAD: Yes, so the technology is an advance for sure. The scalability, the speed and the cost is what all this developer activity you see is built around. So we start base at Coinbase, which is our own proprietary protocol.

It’s actually a giant step forward on all three of those factors. And you see enormous amounts of developer activity on the base as developers try to build new applications that solve that speed scalability, security, trilemma. And so the innovation is catching up with the demand and the need.

And it’s exciting to see. It will happen. It happens quickly. But we’re not quite there, but we’ll get there.

– Where will you spend most of your time over the next six months?

FARYAR SHIRZAD: Well, from a policy perspective it is difficult to focus on any one area. The US is of course significant. The legislation will take up a lot of energy.

And that will be a big important focus of ours. But we are very active in all the jurisdictions that are currently working on rules. The mica regulations in the European Union therefore go through what is known as the level 2 technical standard process. It will take about a year. We are very focused on that.

The United Kingdom is developing an excellent framework around crypto and stablecoins. We are working on it. Australia just came out with a consultation.

South Korea is engaged in a consultation. The Brazilians chair the G20 in their own consultation process. So there is no shortage of areas for us to work on. And we are committed to being part of all those debates.

– Sounds like you’re getting a lot of airline miles in the coming year. Faryar Shirzad from Coinbase, thank you very much.

FARYAR SHIRZAD: Okay, thank you both. Thanks for having me on.