Is the decentralized crypto business in trouble?
There is a new tug of war between centralized finance – government-issued currency (fiat) – and decentralized finance – privately-issued cryptocurrencies that can be exchanged for fiat. Bitcoin is in the crosshairs. It catches a massive fire.
This battle is not new. But it heats up and the challenge loses, don’t let anyone fool you. Feeling matters. Centralized finance can put an end to it. Don’t think it’s not possible.
Please convince me I’m wrong.
Cryptocurrency was not created to be an underground secret society. It was created to become mainstream. Blockchain projects with their own coins want investors in those coins, they want use cases for those coins. Having a centralized power shut it down for some reason – because the Dear Leader doesn’t like your metaverse – is the destruction of that use case.
The government and their friends in the tech world are coming for your bitcoin, I’m sorry to tell you.
PIECE OF MONEY
Coinbase described it differently. They said they took action against accounts “we believe are engaging in illicit activity, many of which we have identified through our own proactive investigations,” Chief Legal Officer Paul Grewal said in a blog post. This suggests that it has nothing to do with government sanctions and demands, even if they are not direct demands. Grewal adds in his blog post that Coinbase “fully supports” the international economic sanctions imposed on Russia following its invasion of Ukraine.
It is unclear whether Coinbase would have banned the 25,000 Russian-owned wallets had it not been for the war. My guess is no. This is a political gesture linked to sanctions.
Kraken, another exchange available to US investors, said it would not follow Coinbase’s lead.
“If we were to voluntarily freeze the financial accounts of residents of countries attacking and unjustly provoking violence around the world, the first step would be to freeze all US accounts,” said Kraken’s CEO. Jesse Powell wrote on Twitter. “In practice, it’s not really a viable business option for us.”
It’s a “boom”.
For the record, sanctions on Russian Bitcoin accounts do not exist. The Treasury only talked about it while floating trial balloons. But nothing was done on Tuesday afternoon.
Coinbase and Kraken are centralized exchanges, but the fact is that cryptocurrency is equated with decentralization.
Canada has also shut down access to Bitcoin. People donating to truckers taking weeks off to protest the country’s draconian Covid policies have been told that the Bitcoin accounts of key organizers are known and blocked by the Trudeau government. Some crypto wallets refused to comply.
It’s good news. The Bitcoin team are the good guys.
“If there are bad actors — as opposed to activists — then all ecosystems, decentralized and centralized, should try to stop them,” says Beth Haddock, advisor to Balancer Labs in New York?
Makes sense. You want to maintain the integrity of your currency or exchange. But that was not the case in Canada. A government was quick to see a group of activists as bad news and blocked them from transacting not in Canadian dollars, but in Bitcoin, which is not legal tender.
If a centralized power can shut down a currency it doesn’t own, print, then the use case for decentralized crypto is in trouble. If they are in trouble, many of these coins look more and more like a gaming chip tied to fizzy blockchain projects and video games that few have even heard of.
“Bitcoin can be shackled by the power of central banks or governments; but we have seen the world’s second largest economy – China – do its best to ban Bitcoin and yet here we are,” says Naeem Aslam, Chief Market Analyst at AvaTrade UK. “That said, the centralized role of governments can certainly limit their institutions to having Bitcoin in their portfolio or as an investment instrument. In this scenario, we could see sentiment turn more bearish. »
Governments can influence centralized exchanges and wallets, but – says Yubo Ruan, founder of Parallel Finance in San Francisco – they “will never have the ability to truly shut down the Bitcoin network.”
Government influence on centralized exchanges like Coinbase can have a negative impact on sentiment, which is reflected in the price. Bitcoin fell after Canada cracked down on cryptocurrency donations to truckers.
“It’s probably because a portion of users may worry about their ability to withdraw money from their digital assets in the future and decide to exit the market prematurely,” Ruan says of recent sales.
The United States has asked centralized exchanges to ban users in Russia. Bitcoin prices fell more than 2.4% after Coinbase announced it was freezing 25,000 wallets.
Centralized exchanges are easier for governments to defeat. But they are also perceived as the safest.
These centralized protocols will continue to be pressured to put safeguards in place to know their customers so they can do business in a traditional, compliant way. And can be easily stopped by centralized powers.
“The only way forward is to get CeFi and DeFi entities to align the best of both worlds, while keeping digital identity self-sovereignty at the core of their architecture,” says Brandon Dalmann, CMO at Unizen. in the heart of America.
DeFi 2.0 takes into account that DeFi 1.0 still lacks autonomy and privacy.
Perhaps that’s why we’re seeing a rise in platforms run entirely by Decentralized Autonomous Organizations, or DAOs, that add privacy-focused features to further enhance user sovereignty, says Dalmann.
“Uniswap competitors like SushiSwap, Trader Joe, are growing their respective user bases. Binance recently invested in Automata Network, a privacy-focused middleware that can be added to existing decentralized exchanges,” says Dalmann.
Bitcoin is the largest private currency in the world. The government has little control over it. They want more control over her. This will be especially true if ever there is a successful rollout of a digital dollar or euro. Computing a competing currency on investment, inflation, and as a means of imposing sanctions would be MIT level physics. One can only imagine the difficulties ahead of us. It is unclear whether the markets appreciate this fight. All in all, it looks like the market thinks this is a challenge fight and Bitcoin will win.
Over the past few years, Bitcoin has become a preferred currency over domestic fiats. See El Salvador for example.
“As economies move up the adoption curve of using cryptocurrencies for payment, rather than just investment, we will see the power of immutable peer-to-peer money,” John believes. Wu, president of Ava Labs.
Everyone has Ukraine in their brains. The country is a hotbed for cryptocurrency adoption as its currency is weak. Chainalysis, a blockchain data firm, estimates that around $8 billion worth of cryptocurrency passed through Ukraine last year, with a significant amount of activity occurring on-chain rather than through centralized sites.
“We have seen countless examples in recent days of how cryptocurrencies are helping ordinary families in Ukraine flee or better manage the tragic situation inside the country. We believe that ordinary Russians – also caught up in this nightmare – also deserve borderless, permissionless, censorship-resistant and unconfidential monetary alternatives,” says Nigel Green, CEO and Founder of deVere Group, a global asset manager with offices in London and Singapore. . “We are against Putin’s war – and he should be punished – but not against the Russian people.”
Bitcoin is a big market. Cryptocurrency is a market at least as big as artificial intelligence or electric cars. Now imagine countries like the United States allowing their citizens to buy all of these things in bitcoins instead of dollars. What would that mean for the currency?
That’s another debate.
For now, we see governments easing their powers against Bitcoin. From Canada to China and the United States, they say centralized powers can shut down Bitcoin whenever they want. This is another shot across the arc. They are getting louder and louder. The fringe continues to grow. Investors hear them better.
“Canada was overbearing and reactionary,” says Ruan. “But I think regulation is inevitable for decentralized finance. Whether governments are doing the right thing and choosing financial freedom over government control with these regulations remains to be seen. »
Such regulations can mean legal rights, investor protections from scammers and false promises, and transaction taxes, such as a sales tax. But will it be a higher tax for not using the local currency or the digital dollar? I think so.
The Biden administration is reportedly preparing an executive order on bitcoin this week.
Beth Haddock hopes easy bans on Bitcoin accounts aren’t a growing trend.
“I hope that any defiance exchange bans, like efforts to stifle free speech and personal freedoms, will not succeed,” she says. “There may be local impacts, but I think limiting access (to Bitcoin and cryptocurrency) globally is not going to be possible.”