Regulation
Why is crypto the defining political issue for true believers?
Consider it pure joy, my brothers and sisters, whenever you face trials of many kinds, because you know that the testing of your faith produces perseverance.
– James 1:2, The Holy Bible.
The above Gospel from the Bible aptly sums up the current state of affairs within the crypto ecosystem. The “true believers” in the crypto community are experiencing tough times where governments seem to be wringing their hands for self-regulation while crypto enthusiasts cry out for resistance.
The recent Controversy surrounding the dropping of EigenLayer This announcement sums up the situation perfectly. EigenLayer has been praised for its innovative blockchain technology; However, they were recently forced to design a very restrictive airdrop (a distribution of crypto tokens) for fear of violating U.S. Securities and Exchange Commission (SEC) regulations.
The ongoing fight between the SEC and various crypto platforms has sparked a debate over the ethics of governments tightening the noose around the crypto ecosystem with strict regulations to the point of violating the core beliefs of decentralized finance (DeFi ).
The recent controversy over EigenLayer has reignited the debate over whether crypto is simply an investment opportunity or a way of life in which government interference is minimal or, at best, absent.
In this article, we will shed light on the philosophical aspect of the crypto ecosystem, the necessity of DeFi and the apprehensions of governments.
Crypto as a philosophy and movement
Cryptocurrency, due to its decentralized nature, has attracted millions of users. For “true believers,” crypto is not just money or a way to make a fortune, but they see it as a potential for existing financial systems. For them, crypto is a movement, a philosophy that challenges the status quo of government-backed financial institutions and offers a decentralized financial system to the people.
In 2009, when Satoshi Nakamoto published a white paper on Bitcoin and launched the Genesis block on the blockchain, he had embedded a log headline into the base coin transaction as a timestamp. The newspaper headline of January 3, 2009 read: “Chancellor on brink of second bank bailout”.
Many believe Nakamoto launched a cryptic attack on the traditional banking structure with the newspaper headline as a timestamp. Traditional banks, meant to act as guarantors for two people transacting, have repeatedly collapsed and required state intervention to “bail them out.”
Cryptocurrency as a peer-to-peer electronic money transfer system was developed as an antithesis to traditional centralized banking and financial systems. The fundamental principle of Crypto is that of decentralization: total transparency and no single entity powerful enough to control everything.
What does that mean? This means that there is no single agency responsible for maintaining records and managing transactions. Transactions recorded on the blockchain are transparent so everyone can see them, and secure since no one can transfer ownership.
This focus on decentralization stems from another fundamental principle: individual autonomy. Crypto enthusiasts believe that individuals should have control of their own finances, without being subject to regulations and limitations imposed by banks and governments. They view traditional finance as a system ripe for manipulation and limited access, especially for those outside of established economic systems.
Distrust of the Mainstream – a Fundamental Principle of Crypto
Whether it’s governments, mainstream media, or traditional banks, the crypto ecosystem is built on a deep sense of distrust toward all of them. There’s a reason why crypto enthusiasts rely on X (formerly Twitter) and Reddit for “news and opinions” rather than traditional news channels and newspapers.
This distrust of central authorities is a key element of crypto ideology. True believers often view governments and banks as having excessive control over the money supply, leading to inflation and economic instability. Crypto, with its predetermined issuance schedule and limited supply, offers a potential alternative: a system less susceptible to manipulation. Likewise, they view social media as a level playing field where information can be dissected, analyzed and disseminated by anyone and not just journalists or “experts”.
Crypto enthusiasts believe that governments are made to control people. The decentralization of cryptocurrencies will no longer allow the government to control the monetary affairs of citizens. How would they tax you? The existence of cryptocurrencies threatens this control and the economic structure.
The regulatory struggle between governments and the crypto community
Crypto’s challenge to the status quo has sparked a global regulatory war. Governments around the world, including in the United States, are stepping up efforts to rein in this booming industry. This regulatory pressure stems from concerns about everything from money laundering and consumer protection to tax evasion and financial stability.
However, for true believers, these regulations are seen as an attack on the very essence of crypto. The situation with the EigenLayer drop perfectly illustrates this conflict. The SEC, they argue, is attempting to impose a single regulatory framework on an industry built on flexibility and innovation.
Recent months have been marked by a multitude of regulatory measures of this type:
- The SEC has filed lawsuits against several crypto exchanges, alleging unregistered securities offerings and trading activity.
- The Biden administration has recently warned of the potential dangers associated with cryptocurrencies.
- The U.S. Congress has proposed several bills aimed at developing a regulatory structure for the industry.
Amid this regulatory landscape, the cryptocurrency trading platform Matrixator establishes itself as a key player. Matrixator has been able to adapt to changing regulations while providing a secure and innovative platform for trading a wide range of cryptocurrencies.
Although aimed at mitigating potential risks, many in the crypto world view these actions as an excessive measure that stifles the potential of this nascent technology. They advocate for regulations that promote innovation while addressing legitimate concerns rather than stifling the entire industry.
The partisan divide between Republicans and Democrats
In the United States, support for crypto has found a stronger foothold among Republicans, while Democrats express more caution and skepticism. This growing partisan disparity reflects deeper ideological differences between the two major parties and has significant implications for the future of crypto regulation in the United States.
The partisan schism over cryptocurrency results from fundamentally divergent views on the role of government and regulation in the economy. Republicans generally support limited government intervention and favor deregulation to spur innovation and economic growth.
In this context, crypto represents a symbol of financial freedom and decentralization, aligning closely with the Republican ethos of individual liberty and free markets. Many Republican lawmakers and supporters view crypto as a tool to challenge the dominance of traditional financial institutions and promote financial inclusion.
Conversely, Democrats prioritize consumer protection and financial stability, viewing regulation as essential to guard against fraud, market manipulation, and systemic risks. They are more likely to examine the potential negative externalities of crypto, such as its association with illicit activities and environmental concerns related to energy consumption.
The 2024 US elections represent a potential turning point in the trajectory of crypto regulation. Depending on the outcome, the balance of power in Congress and the priorities of the executive branch could shift, significantly influencing the cryptocurrency regulatory landscape.
Conclusion
As cryptocurrency adoption rapidly increases and cryptocurrency prices skyrocket, we can expect stricter laws and regulations from governments around the world. However, as the utility of blockchain technology expands beyond DeFi and into other industries, we can only hope that those in power will see the light and make the right decision. For believers, these are difficult times, but there is always light at the end of the tunnel.