The world’s worst crypto asset policy caused by FTX bankruptcy[Column]| coindesk JAPAN | Coindesk Japan

When thinking about policy making in Washington, DC, it’s important to remember that governments, like all other organizations, are made up of people. Humans are often complex creatures whose emotions undermine their ability to make rational decisions.

For some time now, following the barrage of regulatory enforcement actions against the crypto industry, I have been concerned that there are danger signs of politicizing crypto policy in the United States. Concerns remain, but are now a little more sensitive, thanks to two people with deep political connections. Both explained how emotions, especially anger and confusion, played a major role in the crackdown on the crypto industry.

It was a reminder of the importance of clear and sacred governance rules, whether woven into democratic structures like the US Constitution or into the consensus mechanisms used by the open source software community.

Disciplinary regulation

Punitive regulation is the most emblematic of the events that have been attributed to Sam Bankman-Fried over the past five months. The crackdown on Kraken, Coinbase, Paxos, Binance and others has been largely driven by a desire to punish FTX founder Bankman-Fried. The shockingly rapid bankruptcy of FTX last November rocked the cryptocurrency industry.

One of the aforementioned sources described the thinking of Biden administration officials and politicians, both Democrats and Republicans: “If you think you can go into their homes and humiliate them by giving them a lot of money, you are making a big mistake,” he said.

Prior to FTX’s bankruptcy, politicians, mostly Democrats but including some Republicans, received donations totaling over $74 million (approximately 9.8 billion yen, equivalent to 133 yen to the dollar) from FTX, He pointed out the fact that he built a relationship with Mr. Bankman-Fried.

No one in the cryptocurrency industry takes Bankman-Fried’s string of frauds lightly, and most want stricter regulation. Unfortunately, Bankman-Fried has stymied any chance of a clear regulatory framework, allowing regulators like the Securities and Exchange Commission (SEC) to crack down at will. Most frustrating of all is that enforcement actions are capricious and disproportionate to the offense committed.

I’m not talking about regulation by enforcement action. It seems that we have entered a crazy new era of “regulation by punishment”.

Not to mention the fact that millions of investors, employees and developers involved in the cryptocurrency industry are being held accountable for the guilt of some fraudsters they didn’t know, much less admit to. do not have.

american escape

The biggest problem is that America now has the ability to shape this essentially borderless technology direction, as there are few physical or geographical reasons for blockchain developers to prefer one country over another. is about to lose all No other developed country has taken a more hostile stance toward the cryptocurrency industry than the United States.

In the age of AI (artificial intelligence), there is a growing perception that the ever-important cryptocurrency and blockchain innovations are leaving the United States in search of a friendlier country. If America wanted to keep such technology away from the bad guys in the lawless state, a particularly hostile policy would be nothing short of counterproductive.

But this vengeful situation, like many emotionally driven overreactions, is sure to subside. Anger will arguably give way to a more mature approach to policy. That said, the damage already done to America’s potential as a magnet for crypto investment, entrepreneurship and innovation would be severe. Leaders of all industries in America are warning about the exodus of the cryptocurrency business from America.

Whether the current situation is a “war on crypto assets” or just a deliberate attack, those involved in the crypto asset business are facing a series of criminal and civil complaints about what activities are lawful. In the absence of clear legal guidance as to whether or not it is illegal, the company sees this as a message that continuing to do business in the United States is too risky.

The message was a big blow in two ways. That the regulatory action was so orderly that it didn’t seem like a coincidence. The White House also released a report that severely criticized the cryptocurrency industry. It was like reversing an executive order issued a year ago.

The situation was further exacerbated by Democratic Party leader Senator Elizabeth Warren’s launch of a political campaign to rally the “Anti-crypto Army.”

Who will rule the rulers?

From these vicious and ludicrous human flaws, the French philosopher Montague created the idea of ​​”separation of powers.” It is a governing principle that protects society from the mistakes and corruption of its leaders. This idea is enshrined in the US Constitution.

It also ties in with the blockchain idea established in the Bitcoin white paper. The idea is that we need a system that doesn’t rely on “trusted third parties” to manage money, assets and information. Having to trust intermediaries and representatives always exposes the system to the problem of being run by people, not programs.

I’m not making a radical claim to replace the nation with a digital “network nation.” But it is interesting to think that these new technologies will give people the option to escape to alternative decentralized economic systems, indirectly putting pressure on politicians to become more capable.

It is worrisome that the US and its model of market democracy are at ever-higher risk of losing their economic and technological leadership in a “war on crypto assets”. But at least we can be reassured that technology itself can bring the power of self-correction to political systems to avoid the worst possible outcomes.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: AI-generated image of Sam Bankman-Fried (DALL-E/CoinDesk)
｜Original: Thanks Sam! How FTX Led to World’s Worst Crypto Policy