Regulation
Is FTX’s Sam Bankman-Fried Right About DeFi Regulation?
Last week, while speaking to Politico, Sam Bankman-Fried, the billionaire founder of FTX and Alameda Research, said he had significantly revised his spending on political campaigns. He said his previously announced plan to spend more than $1 billion was a “stupid quote.”
Since the start of the year, SBF has spent approximately $40 million supporting Democratic and Republican election campaigns from coast to coast. So far, that spending appears to have paid off, according to CNBC report the majority of Bankman-Fried’s political candidates gained an advantage in the primary elections. But the former Wall Street quant believes there’s a limit to what money can buy in general elections.
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“At some point, when you’ve gotten your message to voters, there’s just not much more you can do,” Bankman-Fried said in the release. Political interview. “You can spend more time and more messages, more money, more other things [but] you accomplish nothing more.
Much has been written about Bankman-Fried and “effective altruism,” the political theory he subscribes to which holds that people create wealth and give it away either by making targeted donations now or by founding well-off charities. later endowed by the magic of compound interest. .
I guess he feels his money is better spent elsewhere than on a TV commercial in Scranton, Pennsylvania. But where will his money and influence go? The problem with effective altruism is that it is a way of thinking that allows people to rationalize any of their actions.
Bankman-Fried’s political pragmatism was also visible in his recently published crypto-regulatory manifesto “Possible digital asset industry standards.” The blog, what SBF calls “an industry standards playbook,” outlines the path forward for crypto industry self-regulation. Somewhat surprisingly, the sectoral requirements of the SBF have been widely criticized.
It covered seven areas where crypto could write rules for itself while waiting for clearer regulations from above. Some are very simple: more disclosures on crypto advertising, regular audits for cash-backed stablecoins, and a three-step checklist for crypto exchanges determining whether a token they want to list is a security.
Others show how crypto has rubbed off on SBF: It wants a standard where hackers are guaranteed 5% of the bounty if they mine a protocol – assuming they return the rest. (This could encourage more ethical hacking, one of the ways code enthusiasts believe the industry is literally evolving.)
But SBF ran into issues on social media when writing about decentralized finance (DeFi). He proposed a “suitability test” that would restrict access to cryptocurrencies, much like accredited investor rules based on net worth and other factors in the traditional market. This goes against the dominant open source philosophy of cryptography: equal access for all.
It also initially proposed a licensing system for websites that interact with DeFi and other crypto protocols, as well as an automatic blacklist to prevent sanctioned players from using centralized services. Adam Cochran of Synthetix and Yearn Finance called the rules “a moat that allows centralized entities to control at least part of the flow to DeFi”.
In response to the project, many noted that SBF seemed less concerned about the freedoms offered by DeFi than the centralized revenue companies that can leverage the industry. Industry gossip site Rekt, who wrote that he “positioned himself as the US government-approved guardian” of cryptography, and that he was elsewhere compared to a drug lord.
The most compelling arguments came from Erik Vorhees, founder of Bitcoin OG and ShapeShift, who noted self-enforced rules and blacklists would only serve established exchanges that could afford to pay to comply. “You can advocate effective altruism, or you can advocate barring 80 million innocent Iranians from the future of global finance,” Voorhees tweeted. “You can’t do both.”
SBF took the criticism with equanimity, reworked parts of its draft, and wrote a lengthy Twitter thread addressing the particular concerns of a number of critics. The heart of the debate cannot, however, be ironed out. The SBF is a realist who sees regulation coming and wishes to participate in its construction.
This will always offend ideologically motivated crypto advocates, who see crypto itself as a way to improve the world. For its part, SBF never fully embraced the crypto mindset – and it has gone on record to say so. For him, crypto is a means to an end: creating wealth so that those funds can be redirected. (Remember infinite DeFi Fiasco of the “box”?)
Even if criticism remains of the watered-down project, the SBF clarified that he was talking about centralized on-ramps to cryptography, not self-executing protocols. “These are not statements about what DeFi developers, smart contracts, and validators should do,” Bankman-Fried wrote. “It ultimately seeks to establish guidelines for how, for example, the FTX platform – or Fidelity’s – could interface with DeFi contracts.”
The debate over whether crypto should capitulate and erect barriers to entry in the name of protecting the uninformed is actually just beginning. Concessions have been made and will continue to be made, but ultimately it doesn’t matter whether you’re a pragmatist or an ideologue as long as the code works. (This is part, but not all, of the reason BitBoy Alex Jones-style rant that SBF sells itself to “suits…with deep pockets” is ridiculous.)
In response to its critics, SBF emphasized that the industry must resist censorship of peer-to-peer transfers and blockchain validation. This has little to do with whether websites or front-ends block users, or whether DeFi applications follow US Treasury Department sanctions. The question is: where do you want to make the effort? Where does it really matter? Is crypto in “primaries” or “general?” »