US needs to catch up on crypto regulation: Coinbase policy chief

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

Coinbase Chief Policy Officer Faryar Shirzad speaks with Yahoo Finance’s Julie Hyman and Brian Sozzi about the approval from the World Economic Forum annual meeting in Davos, Switzerland.

Shirzad argues the approval will bring new investors into the crypto community and it “put 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 US less relevant” in regulatory talks.

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

This interview is part of Yahoo Finance’s exclusive coverage from the World Economic Forum in Davos, Switzerland, where our team will speak to top decision-makers as well as preeminent 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 raft of spot Bitcoin ETFs. The custodian for many of those ETFs is Coinbase and Faryar Shirzad who is Coinbase’s chief policy officer is joining us here in Davos. Thank you so much for being here. We appreciate it.

FARYAR SHIRZAD: Oh. Thanks for having me on.

– So let us say diplomatically the SEC has sometimes been at odds with the world of crypto. Do these approvals mark a new chapter there, a new sort of rapprochement, or no?

FARYAR SHIRZAD: Well, in the end, the courts had to intervene. And they pretty definitively said that the basis of having turned down Grayscale’s application was arbitrary and capricious and an abuse of power. So really the agency didn’t have much room other than to go ahead and approve the applications.

But it’s a big development. It does two things. One, it brings a whole new raft of investors into the crypto economy, which is really exciting.

And it does symbolically put the SEC on record as blessing an important crypto product. And I think both of those are a big deal.

– In light of this news, what type of questions are you getting from World leaders here on the ground about crypto?

FARYAR SHIRZAD: Well, people watch the developments. But the verdict on crypto is largely been turned in by the G20. You have virtually every G20 economy having adopted some framework of regulation or in the process of adopting.

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So the EU, UK, Australia, Brazil, Singapore. The world economy has moved forward. They’re 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’re taking advantage of that. And, obviously, we at Coinbase are hopeful the US will catch up.

– I mean, on a similar note, you know, Davos in some years, past years when crypto was more at a high in its cycle, you had crypto stuff everywhere. Here crypto signage, crypto companies.

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

FARYAR SHIRZAD: Yeah, I think that’s right. I think there’s a lot more institutional players and mainstream companies, financial companies and non-financials who are getting into crypto. So it’s less of a mysterious phenomenon.

The trading hype that you saw a couple of years ago is less defining as what the sector is. I think the verdict is in that the technology is unassailably an improvement over the traditional financial system. And how it gets integrated is really the question in front of 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. A lot of 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 that’s exciting, much more exciting than what we saw in the past. So you mentioned the US is lagging in this area.

So is that going to continue to be an obstacle for the US crypto industry? Do you see any signs of progress on that front?

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

And in Congress, you have bipartisan support for very constructive crypto legislation. So you had two committees pass important legislation that we expect to come to the floor in probably Q1. We expect that to pass the House.

And so there’s big important bipartisan efforts towards providing regulatory clarity. And I think we’ll get there. Maybe it’s this year, maybe it’s next, but it’ll happen.

– I had a Davos. I talked to the managing director of the IMF Kristalina Georgieva. And I think she was open in viewed crypto as a good payments mechanism, but stopped short in saying it should be viewed as money. Do you think it should be viewed as money? And if not, do you think we get to that point?

FARYAR SHIRZAD: There’s no question. The ability to move value electronically as easily as you send a text is already being adopted by hundreds of millions of people around the world. And governments are now exploring it.

So as policy makers kind of get their minds around crypto, the public is also getting its mind around crypto. And they’re voting with their feet.

A huge portion of the global population owns crypto. You have trillions of dollars of stablecoin base settlement occurring every year.

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

FARYAR SHIRZAD: Yeah.

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

FARYAR SHIRZAD: Yeah.

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

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

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

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

– Over the next six months, where will you be spending most of your time?

FARYAR SHIRZAD: Well, from a policy perspective, it’s hard to focus in any one area. The US is obviously significant. The legislation will take up a lot of energy.

And that’ll be a big important focus of ours. But we’re very active in all the jurisdictions that are engaged in rule making right now. So the mica regulations in the European Union are going through what are known as the level 2 technical standard process. That’ll take about a year. We’re very focused on that.

The UK is developing an excellent framework around crypto and stablecoins. We’re working on that. Australia just came out with a consultation.

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

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

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