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Why crypto matters: Foundations of a free and prosperous society

source-logo  blockworks.co 21 May 2024 17:09, UTC

Since our industry was founded in 2009 and the few decades of intellectual cypherpunk discourse that preceded it, there are more than 420 million cryptocurrency users worldwide, of which 93 million are from the United States, with a collective value in the trillions of dollars. Including the internet, no technology has seen such remarkable sustained growth from a single protocol and user to these staggering numbers in a completely uncoordinated and decentralized manner in just 15 years.

Our collective success stems from a lack of trust in institutions, their leaders and globalization’s inequity. Simply put, the social contracts we inherited aren’t being honored. Since 1971, our money has been debased through decades of unending inflation that has hollowed out the middle class. The American dream of owning a home, starting a family and saving for retirement seems unattainable for so many millions now.

Ninety-three million Americans have chosen to explore the cryptocurrency industry because they have become accustomed to systems and products that evolve rapidly with technology and are designed to improve in quality over time, instead of governance structures that continue to fail us through stagnation.

It’s not good enough to demand elections to hire different politicians who renew and modernize our social contract. We must develop capabilities to ensure our social contract cannot be violated. We need high-integrity institutions with blockchain systems embedded within them.

Any politician who supports our industry should be rewarded with election or re-election. Those who oppose it should be fired. The rest of their policy doesn’t matter because the US can no longer govern.

Every problem of the modern age is bipartisan. Since Lincoln’s election, 100% of all US presidents have been Republicans or Democrats. The same is true for the legislative branch and the courts. Electing more Republicans and Democrats won’t somehow magically end the chaos they have caused.

Over 63% of Americans want a viable third-party option in elections. Yet, the majority are unwilling to vote for a third party due to the lesser evil concern. There is a bipartisan agreement (the monoparty concept) that ballot access and design can never change to permit viable third-party options. Once in power, the monoparty gives more money and control to a gargantuan Federal bureaucracy.

The point of cryptocurrencies is to opt out of this system by rebuilding our social contracts using protocols. Eventually, the majority of Americans will be within the new system, which will simply make the old one obsolete.

This belief brings me to the reason for writing this editorial. While both parties are generally incompetent and corrupt in their management of our affairs, there is a policy difference between Biden and others.

The Biden administration has engaged in an all-out war on the cryptocurrency industry for the past few years. From Operation Chokepoint 2.0, which systematically unbanked cryptocurrency companies, to the SEC committing itself to unprecedented regulatory capture and regulation through enforcement that has drawn the criticism of its own leadership, the current climate is of fear, persistent obfuscation, and a guilty-until-proven-innocent attitude.

The administration has also prevented meaningful legislative actions from moving forward. For example, the recent veto threat of legislation repealing SAB 121 demonstrates that any sensible action to provide clarity or rulemaking should be removed. Another example is the White House’s opposition to H.R. 4763, which would dramatically enhance clarity in our industry and create hundreds of thousands of American jobs.

Furthermore, there is a systematic war on liquidity, DeFi and self-custody, where legitimate exchanges, wallet providers and dapps operating without compliance issues have received Wells Notices from the SEC:

  • Coinbase received a Wells notice related to its proposed Lend program, which the SEC viewed as involving unregistered securities​.
  • Uniswap received a Wells notice concerning potential securities law violations​.
  • Coinbase faced another Wells notice for operating as an unregistered securities exchange, broker and clearing agency.
  • Binance received a Wells notice concerning its operations as an unregistered exchange​.
  • Bittrex received a Wells notice for unregistered securities trading​​.
  • Beaxy the exchange received a Wells notice, contributing to its eventual shutdown​.
  • Kraken issued a Wells notice for issues related to unregistered securities​.
  • Robinhood received a Wells notice for operating an unregistered securities exchange​.
  • Consensys received a Wells notice from the SEC for its MetaMask product.

It’s worthwhile to focus on Coinbase. The SEC allowed the company to conduct a public offering and expose retail investors to the risk of its business model. It then declared that Coinbase was operating an illegal business nearly two years afterward, with the exact same facts and circumstances listed in the S1.

The Consensys case seems to stem from Ethereum being considered a security after previously being considered not a security. It also implies that non-custodial wallets are now under US regulatory capture.

Then, there are the words of the administration’s advisors. In the March 2023 issue of The Economic Report of the President, the authors issued a scathing rebuke of our industry:

It has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient. Looking under the hood at these arguments, however, shows a more complicated picture. So far, crypto assets have brought none of these benefits.”

They predictably reference Terra, Bitconnect, and FTX as shining examples of the successes of the cryptocurrency industry.

Moving along, we have The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks, which claims our industry is funding North Korea, needs more enforcement actions, facilitates money laundering, and isn’t FDIC insured!? So, I guess those full reserve banks in Wyoming are an inherent risk to the banking system because they have 108% of customer deposits on hand.

It’s a repeated pattern of claiming the industry is doing something wrong and needs to follow relevant regulations (come in and register), providing no meaningful path or clarity to do so, and then punishing the people who try to comply, like Coinbase. This behavior isn’t the well-intended ignorance of an out-of-touch regime. It’s a systematic effort to end the American cryptocurrency industry.

While I’m cynical that changing leadership in Washington will result in meaningful improvements in the state of America, it is clear that if we create a political cost to being anti-crypto, politicians will back off from over-regulating our industry. We don’t need saviors or some grand plan. We want the power to decide how our money, identity and property should work through voluntary math-based protocols.

In other words, we need time for the industry to grow unopposed. The majority of cryptocurrency users are under the age of 40, and the majority of the young are politically liberal in the United States. If this voting block throws out a president they would usually vote for, then no Democrat in 2028 will be anti-crypto. This translates to the time we need to finish the job and integrate the fruits of our labor into a new American government once the generations cycle out.

Endless propaganda will attempt to convince Americans that 2024 is existential and anyone but Biden will mean the death of America. Somehow, our institutions will collapse due to a single imperial presidency. An orange-colored tyrant will declare himself king and end the Constitution.

The reality is that we’ll witness the same politics we have endured since the beginning of the 21st century: gridlock, bickering, grandstanding and publicity stunts. Our institutions aren’t designed to assign power to a king. They are built to assign power and money to corporate masters who fund the revolving door of the bureaucratic branch of the US government.

Our votes and voices only matter if we use them with focus and intent. If we vote for pro-crypto candidates in 2024, America will eventually heal itself. If we vote against them, then we won’t.

Make your voice count. Vote crypto.

Charles Hoskinson is a Colorado-based technology entrepreneur and mathematician. He attended Metropolitan State University of Denver and University of Colorado Boulder to study analytic number theory before moving into cryptography through industry exposure. His professional experience includes founding three cryptocurrency-related start-ups – Invictus Innovations, Ethereum and IOHK – and he has held a variety of posts in both the public and private sectors. He was the founding chairman of the Bitcoin Foundation’s education committee and established the Cryptocurrency Research Group in 2013. His current projects focus on educating people about cryptocurrency, being an evangelist for decentralization and making cryptographic tools easier to use for the mainstream. This includes leading the research, design and development of Cardano, a third-generation cryptocurrency that launched in September 2017.