Dear Senator Warren,
The FTX fray has breathed new life into crypto regulatory efforts. Politicians jumped at the chance, including you. The bill you recently got introduced demands that the US Treasury Secretary create a rule prohibiting financial institutions from transacting with self-custody wallets, citing the FTX debacle. It was a completely inappropriate response to the failure of a centralized entity already regulated by a government. Your crude approach to regulation is dangerous for innovation in the United States, and especially on Main Street.
Fortunately, some US lawmakers not only understand cryptography, but also the foundation of freedom upon which the United States was founded. Rep. Warren Davidson (R-OH) knew it was only a matter of time before someone like you tried to coerce the Treasury Department into interfering with consumers’ right to self-custody of their digital assets – as a Davidson representative the dish, “owning and owning private property”. Therefore, last February he introduced the Keep Your Coins Act, designed to preserve Americans’ right to privacy when transacting with crypto assets.
The bill would prohibit any federal agency from implementing a rule that would impair a person’s ability to act as an auto-custodian, and therefore their ability to conduct peer-to-peer transactions without the need for an intermediary. third parties, such as FTX. .
“As the federal government seeks to better regulate the crypto ecosystem, it seeks to impose more oversight on American citizens,” Rep. Davidson said after introducing the bill. “It is essential that we preserve the attributes of cash transactions by protecting the permissionless nature of cash. No third party should be required for two people (or businesses) to use money as a medium of exchange, store of value, and statement of account. This bill guarantees that individuals will always be able to transact without any intermediary.
The FTX Collapse clearly shows why self-guard should be protected. Sam Bankman-Fried convinced people to send their digital assets to FTX by positioning the company as a massive financial institution with lavish sponsorships and spokespersons. The illusion that Bankman-Fried cultivated around FTX fostered trust. Blockchains, in the vision of Bitcoin creator Satoshi Nakamoto, are trustless.
Bankman-Fried took clients’ digital assets from FTX and placed them under the control of Alameda Search, the hedge fund he founded that was the trading arm of FTX. He created FTT, FTX’s native token, to be used as collateral on FTX’s loans to Alameda. He exploited Alameda assets at irresponsible levels. Bankman-Fried’s actions are the same old criminality seen time and time again in mainstream finance, and they were made possible because people sent their money to him to act as a third-party middleman. Then submitting a bill in the process regulating self-care makes little logical sense.
FTX clients who transferred their digital assets from FTX to their own self-custody wallets did not lose money to the Bankman-Fried fraud. You want to strip consumers of the only solid protection against the failure of any third-party intermediary.
FTX is the exact opposite of Nakamoto’s blockchain and original cryptocurrency design. “Internet commerce has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments,” bed the first lines of the white paper written by the pseudonymous inventor of Bitcoin. “Although the system works quite well for most transactions, it still suffers from inherent weaknesses of the trust-based model.” Bankman-Fried exploited flaws in the traditional financial system, not the blockchain.
You also argued that another appropriate response to the collapse of FTX would ultimately be for the government to stop people from owning Bitcoin in their retirement accounts. In a letter to Fidelity Investments, you and two of your fellow Senate Democrats — the senses. Dick Durbin (D-Ill.) and Tina Smith (D-Minn.) – argued for a moratorium on people having the choice to allocate Bitcoins to their retirement accounts.
Fidelity, which only recently allowed customers to allocate a portion of their contributions to Bitcoin, does not require anyone to invest retirement funds in Bitcoin. Rather, it simply gives them the choice to add exposure to Bitcoin alongside their stocks, bonds, precious metals, index funds, emerging markets, and other sometimes risky and volatile investments. Choice. This is what Bitcoin and other cryptocurrencies are for. Preventing people from owning Bitcoin in their retirement funds will not stop an FTX future.
During the financial crisis of 2008, you were seen as the people’s champion against the banking system, against the Wells Fargo, against the Chas, against the HSBCs of the world. Bitcoin and other cryptocurrencies are a solution to the predatory practices of banking oligopolies. It’s a way for people to get out of the banking system, take custody of their own money, and not worry about fees and banks taking advantage of it.
Your open hostility to financial freedom goes against American values while undermining consumers, leaving them at the mercy of the financial fraudsters you claim to be fighting. A more constitutional approach would likely encourage innovation. The US state of Wyoming has gained worldwide notoriety for enacting measured blockchain legislation. Perhaps the rest of America – as well as regulators elsewhere in the world, including Europe and Asia – could learn from the so-called “Cowboy State”.