The critical community on crypto Twitter has taken umbrage at billionaire Sam Bankman-Fried’s (SBF) ideas regarding regulations and industry standards.
On Oct. 20, crypto billionaire Sam Bankman-Fried (SBF) posted his thoughts on what he feels is required for crypto regulations to be successful. The lengthy document posted on the FTX Policy website contains a draft proposal of a set of industry standards.
They could be enacted to “create clarity and protect customers while waiting for full federal regulatory regimes,” it stated. Crypto and stablecoin regulations are not expected to be fleshed out until the first half of next year.
Congressman Jim Himes alluded to this earlier this week, saying, “It’s probably not happening in early 2023.”
Crypto guidelines mulled
SBF believes that there should be “blocklists” and not “allowlists” for illicit financial activities. He said that reliable lists of illicit addresses are needed, but peer-to-peer transactions should be free, providing they don’t involve sanctioned entities.
A method to reduce the impact of hacks and security breaches is also needed, but this is a tricky one. He also said that “public disclosures and transparency for assets” should be worked on.
Regarding decentralized finance (DeFi), SBF admitted that this was a tough one:
“This is, frankly, one of the trickiest areas to get right. The most important thing is that we not jump the gun: that industry, regulators, and lawmakers work collaboratively and thoughtfully together.”
He added that retail-facing platforms and marketing should build in customer protection. Stablecoins also need regulatory oversight and “up-to-date public information and audits to confirm that dollar-backed stablecoins are, in fact, backed by the dollar.”
Most of the suggestions were generally agreeable, but there were a couple of things that the crypto community took exception to.
Community bites back
The first to respond was Bankless founder Ryan Sean Adams who said, “Sam. With respect. This absolutely sucks.”
The first point of contention was that DeFi should comply with the Office of Foreign Assets Control. OFAC is a government agency within the U.S. Department of the Treasury which administers and enforces economic sanctions based on U.S. foreign policy. RSA also vehemently disagreed with the suggestion that DeFi front-ends should be registered as brokers or dealers.
Both premises completely remove the “decentralized” part of DeFi, simply transforming it back into CeFi/TradFi.
Another beef was the suggestion that freezing chains become the norm in the event of an exploit or dispute. It was also mentioned in the document that “This would eliminate the U.S. from the crypto race.”
Frax Finance founder Sam Kazemian questioned why only fiat-backed stablecoins should be considered when there are plenty of other collateralized stablecoins like DAI, FRAX, and GHO.
Another respondent summarized the proposals the most succinctly with the following:
“So your solution to the very real and challenging questions of how to properly regulate a technology that can revolutionize the financial system is to… turn it into the existing system?”