29.1 C
Delhi
Tuesday, August 16, 2022

California Pop-Up Clinics Offer Vaccinations Against Monkeypox

https://ift.tt/tmWdByG an effort to boost monkeypox vaccination rates,...

US Defense Chief Tests Positive for COVID

https://ift.tt/IxPq3Di. Defense Secretary Lloyd Austin said Monday...

Judge: Senator Graham Must Testify in Georgia Election Probe

https://ift.tt/rxyvOsz federal judge on Monday said U.S....

Battered by lawsuits, Coinbase seeks liability guarantees in EU

The biggest crypto exchange in the U.S. is trying to convince EU legislators to keep it off the hook for investors’ bad bets on the market.

The focus is a bill that will regulate the bloc’s market in crypto assets, dubbed MiCA. Coinbase’s chief policy officer, Faryar Shirzad, flew to the EU capital from Washington last week to get a lightning round of lobbying in before legislators meet next Thursday to iron out policy divisions among European Commission officials, MEPs and EU capitals.

Given the high stakes and ongoing disagreements, these talks may still need time to conclude. But Shirzad and his team are taking no chances, as Coinbase and other crypto companies harbor concerns over who will be held responsible if and when investors lose money when digital assets collapse in value.

The push comes after U.S. investors filed multiple lawsuits against Coinbase in recent months on claims that the exchange lured them into a false sense of security when buying certain so-called stablecoins — which aim to stay on par with a national currency like the U.S. dollar — before they crashed in value.

One of the most spectacular examples was TerraUSD, once the third-largest stablecoin on the market. It boasted a value of $18 billion before breaking its peg to the U.S. dollar, becoming worthless within days.

With the collapse leaving many investors penniless, a group of plaintiffs accused Coinbase of falsely claiming that TerraUSD was backed by a reserve, when in reality its value depended on financial engineering.

In Coinbase’s view, however, it’s the company issuing the crypto asset that should face the courts. Not the exchange.

“It’s critical not to put platforms … such as ourselves in a position where we bear liability for things that are outside of our control,” Shirzad told POLITICO during his two-day visit to Brussels, declining to comment on the lawsuits in question. “Our goal is to make sure that the liability rests on the right place.”

Coinbase has hardly been immune to the broader crypto downturn, having recently fired 18 percent of its 5,000 workforce to manage its costs. Two-thirds of the crypto market’s value has evaporated since its mid-November highs of $3 trillion, when a share in Coinbase would cost you just under $343. Now you can buy it for around $50.

A smaller budget hasn’t slowed Shirzad and his team’s lobbying efforts, though. He met with influential MEPs and some of the Commission’s top brass on his trip. Coinbase also hosted a dinner for national officials last Tuesday night at Sofitel on Place Jourdan. Attendees enjoyed drinks before sitting down to dig into slow-cooked beef followed by coffee-flavored chocolate cake for dessert.

As they ate, Coinbase outlined its concerns over MiCA’s approach to liability, as well as over a separate anti-money laundering bill that could force companies to carry out extra identity checks on people who use digital wallets that hold cryptocurrencies outside of exchanges.

Stable genius?

The centrality of stablecoins — crypto assets tied to a national currency or a basket of financial instruments to keep their value steady — has come into question amid the broader market turmoil.

They have become the lifeblood of the crypto market, giving investors a place to park their cash between taking punts instead of paying fees to cash out in conventional currency. That safe-haven status leaves investors vulnerable if a stablecoin, such as TerraUSD, evaporates into thin air.

MiCA, which aims to regulate crypto assets and the companies that issue and handle them, could in principle address this risk when it comes into force in late 2024. On paper, the bill says it’s the stablecoin issuer that’s responsible for any false or misleading information that they provide in a so-called whitepaper, which outlines their offering to potential investors.

The problem is what happens when there’s no whitepaper. Tokens issued before MiCA becomes law, as well as non-fungible tokens such as digital art, will be free from these disclosure duties. Crypto exchanges like Coinbase may still list these tokens — but only if they vet them and write a whitepaper on their behalf.

If an exchange falls short of due diligence or writes inaccurate whitepapers on an issuer’s behalf, it would be liable in Europe and subject to supervisory discipline, according to Parliament and Commission officials. That’s why crypto companies should hold capital buffers, they argue.

“The liability of issuers and crypto-asset service providers should be well balanced but should also fully take into account the issue of investor protection, which is in my view one of the key principles that you want to legislate through MiCA,” said MEP Ondřej Kovařík, a Czech liberal who was among those who met Shirzad.

Coinbase insists it already takes steps to vet the crypto assets it handles on its marketplace to improve transparency around them. That said, crypto exchanges argue they should have the same protections against legal action as conventional trading venues do — and Coinbase is seeking stronger language in MiCA to ensure that.

“If there was an issuer of a stock on a traditional exchange on the New York Stock Exchange, for which there was some issue with regard to their disclosures … very few people would say that the New York Stock Exchange should bear responsibilities for what’s in a disclosure that’s filed,” said Shirzad, a Goldman Sachs alumnus. “I think [that’s] an obvious and logical point.”

This article is part of POLITICO Pro

The one-stop-shop solution for policy professionals fusing the depth of POLITICO journalism with the power of technology


Exclusive, breaking scoops and insights


Customized policy intelligence platform


A high-level public affairs network

https://ift.tt/CL8705Z June 27, 2022 at 04:35PM
Bjarke Smith-Meyer

Support Us

Secured by Paypal

Related Stories

Check out other tags:

Most Popular Articles