Due to this increased watch over the crypto space, many firms have been scrutinized and found non-compliant with specific rules. Coinbase is one of the firms under the radar of financial watchdogs. On March 6, Coinbase CEO was interviewed on Bloomberg Radio to discuss the crypto industry issues and how his firm will navigate them.
The crypto industry has been facing two significant challenges recently: regulations and sell-off in coin prices. Many investors lost billions of dollars in 2022 due to the extended bearish market.
The falling prices resulted in the crash of many firms, such as the FTX crypto exchange. As a result, regulators stood up to push for stricter regulations to protect investors.
Brian Armstrong Reveals Measures To Combat Issues
In the interview by Joe Weisenthal, Brian Armstrong hinted that the firm’s layer-2 blockchain, Base, may feature Anti-Money Laundering measures and transaction monitoring features. The users of the new blockchain may be subject to those requirements.
HUGE NEW ODD LOTS:
The selloff in coin prices over the last year + the intensifying regulatory crackdown. https://t.co/mNTYu8zDu0
— Joe Weisenthal (@TheStalwart) March 6, 2023
In his words, centralized actors should take more responsibility to comply with anti-money laundering requirements and implement transaction monitoring programs in their networks. The CEO noted that while Base features some centralized components, it will become more decentralized in time.
But as Chris Blec pointed out on Twitter, the Coinbase CEO didn’t outrightly state that the firm will implement the KYC or AML obligation on the new blockchain. Blec stated that Armstrong only hinted at it but didn’t specify which has been a significant concern since the announcement of Base.
Earlier on February 28, Alec posted a blog discussing the issues about the new layer-2 blockchain. In the post, Alec hinted that Coinbase is subject to the Bank Secrecy Act, Patriot Act, and others, making it mandatory to require KYCs from users.
So, Coinbase will process every transaction on the L2 blockchain negating the claim that it will be permissionless. Blec hinted that on several occasions, Coinbase CEO had avoided a straight answer to how these processes will work on Base.
He believes that if Coinbase must comply with the requirements of regulators, the new layer-2 blockchain will be different from the decentralized blockchain developers expect.
Exploring The Coinbase Layer-2 Blockchain
Coinbase announced the Base blockchain on February 23. The details show that Base is an Ethereum scaling solution where developers can build decentralized apps seamlessly.
Blockchain developers are using “Op Stack” to develop Base to increase the speed of transactions on Ethereum. The network will also ensure secure and low-cost transactions to its users, making it a developer-friendly platform.
Currently, Base is in the testnet phase, and the community is waiting for the date of its mainnet launch, which might be this year.
Featured image from IStock and chart from Tradingview.com