In a post-FTX world, it’s really hard to be a crypto exec.
Not only are your suitcases empty and your income dwindling, but you also have US financial regulators stalking you with subpoenas one day and lawsuits the next.
It’s understandable, then, why industry leaders like Brian Armstrong might want to present themselves to the media and authorities with their state-worshipping footing.
As CEO of Coinbase, the largest cryptocurrency exchange in the United States, one wrong move could see your company sued and regulated beyond repair by politicians already paranoid about an industry rife with fraud. After all, what reason is left for the state not to ban crypto completely?
In a media blitz earlier this week, the executive tried to answer that question: support “cryptocurrencies” while still defending the best interests of the US government. The result, however, saw him promote a use of cryptography more antithetical to the spirit of “decentralization” in which Bitcoin was born.
That’s right: Brian Armstrong is in favor of a US government-issued stablecoin.
Armstrong’s Case for Crypto in America
in a opinion piece Posting with CNBC on Wednesday, Armstrong laid out his usual case for why the United States should be more welcoming to cryptocurrency, rather than take the industry overseas. Doing so would have innumerable negative consequences that can be summarized in three points:
- The United States would lag behind its international competitors in technological and financial innovation, missing out on many consumer benefits.
- The crypto industry will grow in an unstable and unregulated environment offshore, or in jurisdictions that simply have clearer rules.
- The dollar’s prominence on the world stage will continue to weaken and is at risk of being surpassed.
The final issue is what Armstrong’s stablecoin idea is intended to address. As he writes:
“Imagine a world where the US issues its own USD stablecoin on the blockchain. This would not only provide access to the dollar to millions of previously unbanked or unbanked people, but would also be the de facto digital currency for remittances and international currency transfers, ensuring that the dollar remains the world’s reserve currency both on and off the chain. .”
Stablecoins VS CBDCs
The idea of using stablecoins and other cryptocurrencies for international transfers is not new. money gram associated with Stellar blockchain last year for exactly this purpose, and even some central bankers have Recognized its potential in the remittance market.
But advocating for a government-issued stablecoin, as opposed to a privately-issued token like Tether’s USDT or Circle’s USDC, is another story. Such a token would be virtually indistinguishable from a central bank digital currency (CBDC), which even pro-crypto congressmen understand it has the potential to be weaponized as a state surveillance tool.
The Federal Reserve is already in talks about what a potential CBDC might look like. In September, Chairman Jerome Powell stated that a US CBDC would be “private” but not “anonymous,” meaning it would remain a permission-based system that verifies the identities of its users.
Whether one trusts the Federal Reserve not to invade the privacy of Americans in this way, and not to become a 100% state-controlled ledger of money like China’s digital yuan, is another story. Ultimately, CBDCs require users to trust a centralized intermediary to not censor, freeze, restrict or devalue your money.
Aren’t these the problems that Bitcoin, the first decentralized public blockchain, was meant to solve?
The real point of Bitcoin and decentralization
Let’s go back to another of Armstrong’s points about the many benefits of cryptocurrencies, as he lists them in his article:
“Crypto is a faster, more private, efficient, cheaper and user-controlled financial system. It is not a replacement for the traditional financial system, it is an update”.
While not everything about this statement is necessarily false, it really misses the point. Bitcoin was never initially created to be a more efficient means of payment.
At its core, Bitcoin is an open, neutral, borderless, and censorship-resistant monetary network. It is often called a “rules without rules” system that uses work test to remain credible and secure (a consensus mechanism often criticized for being highly inefficient.)
Some of Bitcoin’s biggest proponents consider it a control authoritarianism, allowing users living in oppressive and hyperinflationary regimes to retain control of their money and purchasing power. In short: Bitcoin embodies freedom.
As a trustless and functional monetary system, Bitcoin actually solves the problems that justify the existence of central banking and fiat currency to begin with. TO appointment Satoshi Nakamoto:
“The root of the problem with conventional currency is all the trust it takes to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is littered with breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with only a fraction in reserve.”
How do we square this with Armstrong’s argument that cryptocurrencies are not a “replacement” for the financial system?
Compared to the level of control the state has over the banking establishment today, Bitcoin offers a much more liberating alternative. It puts digital property rights in the hands of their holders, reclaiming them from a banking establishment that has controlled them for decades as a mere byproduct of technological limitation.
In that sense, Bitcoin is the opposite of the government-issued stablecoin that Armstrong idealized. He delete control of the monetary authorities of our time, such as the US, rather than strengthening them.
Since “decentralization” has been the favorite cryptocurrency buzzword for the past decade, that is something good right?
The Inevitable Betrayal of Crypto Leaders
Decentralization may sound great from a humanitarian perspective, but for Coinbase? That’s bad for business.
Sure, it sounds good to the army of crypto-loving libertarians who value such things. But for a publicly traded, regulated company in the United States, it’s hard to go into too much detail about what “decentralization” entails without enticing the government to go after it.
As it is, Coinbase is already under great legal pressure from the SEC that you are only hurting your bottom line. Explaining to the government how cryptocurrencies give consumers direct access to a technology that threatens their geopolitical control would only worsen Coinbase’s relationship with regulators, as it does with the entire industry.
That explains Armstrong’s odd penchant for promoting highly antithetical crypto as a government-issued stablecoin, in favor of real cypherpunk values. His main incentive is to keep his company and his industry alive, even if it requires turning crypto into something unrecognizable.
Know that this is nothing new. Circle, a stablecoin company closely related to Coinbase, did not hesitate to violate the “censorship resistance” ethos of cryptocurrencies in August when froze USDC blocked within OFAC flagged Tornado Cash addresses. Even as he voiced his opposition to Treasury policy, his company’s hands were tied enforcing the new rules under the requirements of the Bank Secrecy Act.
Former FTX CEO Sam Bankman-Fried (SBF) (whose red flags they’re much easier to spot in hindsight after recent events) was much less shameless than that. Just a few weeks before their exchange imploded, they actively defended for regulating DeFi using similar OFAC blacklists and requiring DeFi front-end providers to register as broker-dealers. Naturally, he was widely criticized by the crypto community for effectively defeating the purpose of DeFi with such rules.
Even CBDCs are not a new idea for crypto leaders. Joseph Lubin, co-founder of Ethereum and CEO of ConsenSys, has previously endorsed the issuance of CBDCs on the Ethereum blockchain, within a 28-page CBDC. White paper published by the firm.
“CBDCs provide central banks with forward-looking tools that allow them to implement monetary policy in more direct and innovative ways and keep pace with technological change,” he wrote.
Executives like Armstrong, Allaire, SBF, and Lubin may or may not take the core values of cryptocurrency seriously. Regardless, each is just a crypto brother second, and a businessman first. Seeing them forced to side with the government over values was only a matter of time.
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