In the interest of spreading awareness and not letting our government (at least in the United States) carelessly regulate crypto assets and do more harm than good in the process, I am making available a letter I wrote. Anybody reading this has my permission to use, alter, send or publish the following letter. I know not everyone here has time to make their thoughts known and educate our ruling class, so I hope this streamlines the work for many of you and allows a high volume of potent rhetoric representing our interests.
I can only hope my and my fellow citizens' thoughts are actually read in these emails. I think it's worth addressing some of your concerns which are often repeated by folks in Washington from the perspective of someone with competency around the subject. With respect, it is obvious from the perspective of a technically literate non-billionaire that the current rhetoric you and most others in your position have taken on crypto currencies must come largely from an ignorance on how most of them operate.
"Whereas traditional currencies, such as the U.S. dollar, are overseen by central banks and regulatory agencies with legal obligations to work for the public interest, cryptocurrencies by design lack centralized oversight. Historically, gaps in oversight and regulation of the financial system have contributed to financial instability, consumer protection problems, and increased criminal activity."
The first mistake here is to take literally the term "crypto currency." While catchy and alliterative, that does not mean you as 'the government' now have ten thousand potential unregulated overthrowers of our national currency. How people should be referring to these technologies by default is with the term "crypto assets." I believe if you begin your journey of understanding with this fundamental (and accurate) shift in perspective much of the panic will seem misplaced. The reason these technologies are more like assets rather than currencies is precisely because they are not centrally controlled, and therefore cannot be altered from the top down in swift response to events in the kinetic world like The Federal Reserve is known to do. Crypto Assets are far more stable in their parameters - despite the common monicour of "currencies," these assets if they are to be considered "decentralized" (the primal qualification of legitimacy in the space, meaning their function is crystal clear and a change in its function is difficult, slow, and predictable) then by definition they will be unable to fulfill the fluid requirements of a national currency and therefore do not attempt to, or are a threat to the United States Dollar.
While that reasoning applies to all crypto assets, it's worth noting that many of these assets stray even further from the idea of a currency - meaning their value does not come from being an effective means of exchange, it actually comes from that crypto asset's ability to perform a useful function. When you hear about "Ethereum," or more broadly "smart contracts" what is really being discussed most of the time are tokens that can be redeemed for smart contract operations which perform a service. Currently the big one I'm sure you've heard of is "DeFi" (decentralized finance), but as the technology improves these contracts will be able to interact with data from traditional markets and businesses in a decentralized manner. As a huge enthusiast I could go on, but the point is that tokens redeemable for these use cases are not, nor do they pose as "currencies" in the sense of your concern. These tokens are instead a digital analogue of material goods.
Another concern anybody with an understanding of crypto-technologies and crypto-assets has when reading your generic response is the moral panic around a lack of centralized oversight. Perhaps if in your perception crypto assets are attempting to be and pose a threat to a national currency then this makes sense, but as laid out above this view is not justified. Taking the most basic example: Bitcoin, and comparing it to gold - gold has no central oversight, really. The financial sector cannot control the supply of gold, nor is it in the interest of a free market society to control the sale of such a basic, fundamental asset. Since Bitcoin does not, and cannot, serve the interest of a select few (it cannot even serve the interest of its largest holders), concern about consumer protection from lack of oversight is, as are many concerns from Washington on crypto assets, misplaced. The Bitcoin protocol is laid out clearly (please research the significance of "open source" in regards to technology before even considering forming any regulations ((as a famous podcaster once said: "If you can't code a "Hello World" program, you should not be allowed to rule in a modern society))); this clear dictation of Bitcoin's rules of operations in its code are extremely difficult and slow to alter - there is always a huge warning to make even the most minute of changes.
Bitcoin is impossible to change in the following ways:
In a way that is not in the interest of most of its holders, whether those holders hold very little or a huge amount.
In a way that is unexpected or abrupt.
In a way dictated by a set of technologically gifted but malicious actors.
And it is extremely unlikely that:
- Bitcoin will ever change its protocol in any significant way from what it is now.
With these things in mind consumer protections and additional regulations (it's already taxed just like property and gold are taxed) is the governmental equivalent of helicopter parenting. A protocol which is as predictable and slow to change as Bitcoin serves no deed of tricking those who interact with it.
Of course the more logical concern now is the myriad of other crypto assets which are not Bitcoin. Most of these good features of Bitcoin apply to most of the other crypto assets - a select few only present the veneer of true decentralization as a faux selling point. These faux crypto assets are not crypto at all - if the ability to alter these coins or tokens exists for the interest of the select few they are by definition not a crypto technology. If the government fails to make this distinction then they will be making the same error in perception as all the people tricked by these faux crypto assets, and be firing a shotgun to kill a tick on a horse - if you regulate based on the fear of a few bad eggs, and do not do so predicated on an intricate understanding of the underlying technology, the amount of damage you will be doing will be murky to you, but crystal clear to people like me who understand this technology, and the younger generation who probably became technologically superior to yours before they graduated highschool.
I hope it's clear that your generic email was an insult to the intelligence of those who know the basics of crypto technology, and that any mis-steps in setting regulation will not soon be forgotten by interested voters in the coming elections. At least Ted Cruz takes a quizative view of that which he does not understand when it comes to crypto assets - I would hope the politicians representing our best open minded and forward thinking citizens would be careful not to end up as effective luddites.
No comments:
Post a Comment