As we see cryptocurrency possibly entering the world of regulations and legitimization on the government level, one of the world’s leading cryptocurrency trading platform, Coinbase, has decided to hire first ever chief compliance officer in order to build up its team concerning the aspect of legitimization and regulation of cryptocurrencies to keep its internal framework tidy and clean.
Coinbase announced this past Tuesday that Jeff Horowitz, previously the managing director and global head of compliance at Pershing, will be appointed Coinbase’s first ever chief compliance officer. Pershing is a well renowned subsidiary of BNY Mellon, an organization that provides resources and solutions to financial firms, institutional investors, advisers and managers in order for them to succeed. The risks associated with the market of cryptocurrency have been major problem since the very begining. The hiring of an experienced chief compliance officer in the form of Jeff Horowitz, to keep Coinbase’s integrity and regulatory framework intact is a great step taken forward by the organization.
In a blog post this past Tuesday, Coinbase’s President and Chief Operating Officer Asiff Hirji stated that:
As Coinbase — along with the cryptocurrency space as a whole — grows and matures, continued regulatory compliance across all the varying jurisdictions globally will be critical. Adding Jeff to our team is one more important step along this journey.
Jeff Horowitz is well-renowned in this category and has a lot of previous state-of-the-art hands on experience coming into Coinbase. Before working at Pershing, Horowitz had been working with Citigroup, Goldman Sachs and Salomon Brothers in the sectors of compliance and anti-money laundering (AML). Besides working with these, Horowitz also has the experience of working as a banking regulator with the famous and well-established Federal Deposit Insurance Corporation.
Coinbase had seen bitcoin go through a roller-coaster ride since last year. It has seen bitcoin go through the roof with its value crossing over $20,000, to below $6,000 this year, and despite all the volatility of the market, Coinbase has not been reluctant in investing its gains in the crypto market, ranging from products to acquisitions concerning fully licensed broker-dealer program.
In the hindsight of all this, we have seen some major financial institutional investors holding back from investing in the market of bitcoin as we witnessed bitcoin nosedive to about half of its value as compared to the start of this year. One of the reason might be some major crackdowns on frauds, hacks and lack of investors linked to the insecure market of cryptocurrencies.
Regarding risks and frauds involved with the market of cryptocurrency, we have also seen United States Securities and Exchange Commission (SEC) take actions against the fraudulent initial coin offerings (ICO). Besides cracking down on the frauds linked with ICOs, quite recently, the SEC has also disapproved another proposal for the establishment of a bitcoin exchange traded-fund (ETF), suggesting the use of the market as carrying out manipulative and fraudulent activities. In the rejection to the ETF proposal presented by the Winklevoss twins, backed by Bats BZX, the SEC stated that:
Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin or blockchain technology more generally has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because as discussed in detail below, BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.
As the need for regulatory framework and legitimization is rising in the sector of cryprtocurrency, the hiring of Jeff Horowitz is seen as a smart move by Coinbase. We have seen major institutions across the crypto space demanding to place a regulatory framework over the market of cryptocurrencies and the move made by Coinbase to form and beef up its own compliance team is just the thing that the San Francisco-based startup needed. The desire for a regulatory framework to be in place for market has also been expressed by Nasdaq recently. The Chief Executive Officer of NASDAQ stated that:
Certainly Nasdaq would consider becoming a crypto exchange over time. If we do look at it and say ‘it’s time, people are ready for a more regulated market,’ for something that provides a fair experience for investors, certainly Nasdaq would consider becoming a crypto exchange, over time.
Ripple has also expressed its inclination towards a proper regulatory framework to be in effect for the crypto market. The Chief Marketing Strategist of Ripple, Cory John stated that:
We’ve seen what happens when there aren’t investor protections. We’ve seen investors lose so much money, and we’ve seen it in the world of crypto. We’ve seen some real bad actors involved, so we’re thrilled that regulators are getting involved.
In a nutshell, in the light of all the manipulative and fraudulent activities that have been percolating around the world of cryptocurrency, formation of a compliance team is an excellent step taken in order to make the operations of the organization more and more transparent. This will be beneficial for the organization as a whole from the perspective of the regulators and institutional investors in the long run. Owing to his experience with all the big shot organizations in the past, Jeff Horowitz might just prove to be the perfect guy needed by Coinbase to head its compliance team as the chief compliance officer.