FTX CEO Sam Bankman-Fried (SBF) is many things.
Now, after his thoughts on crypto regulation, many people are adding “crypto villain” to the list.
Most reasonable people in crypto recognize that regulation is not always bad. Clear and fair regulatory guidelines are necessary for crypto to take that next step into mainstream adoption.
However, what SBF advocates for in his post goes far beyond what could be considered beneficial for the industry.
- The requirement that front-ends (the interface that users actually interact with) become registered broker-dealers with KYC obligations.
- The requirement that stablecoins be fully backed by U.S. dollars, treasury notes, or bills.
- Complete OFAC compliance.
- The recommendation that ‘trusted actors,’ i.e., exchanges like FTX, keep and share blacklists of addresses suspected of being associated with crime.
Again, we recognize the need for crypto regulation. It’s crucial to the future of the space. But these guidelines are so out of line with the DeFi ethos that it’s almost hard to believe somebody in crypto wrote them.
- Front-ends are how people interact with DeFi protocols. To require front-end KYC is to turn DeFi into FedFi.
- Requiring that stablecoins be fully backed by U.S. dollars would help to prevent a collapse a la Terra. But, it would also hamstring the industry from developing future decentralized and capital-efficient stablecoins.
- Complete OFAC compliance sounds good, but then you realize OFAC includes entire nations, such as Iran. If we’re going to let the government tell us you can’t transact with anybody from an entire country, you once again don’t have DeFi anymore, you have FedFi.
- A key component of DeFi is that it is permissionless and accessible to all. If ‘trusted actors’ have the power to blacklist people arbitrarily, what are we even doing here? At that point, we might as well just use traditional finance systems.
A Snake In The Grass?
On some level, we shouldn’t be surprised this is coming from SBF. This is the same man who said he didn’t care about the crypto ethos, just the money.
And although regulation will be a component of crypto in the future, and perhaps it is better to start having an open conversation about it, many believe that SBF should not speak for the entire industry.
These people believe that SBF cares about SBF, not crypto. He will do whatever it takes to ensure that FTX succeeds in the long run. If it means donating millions of dollars to politicians, he’ll do it. If it means selling out the industry where he made his fortune, it’s clear he’ll do that too.