Why Crypto has Become the Key Political Concern for Devoted Followers
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 taken from the Bible rightly summarizes the current state of affairs within the crypto ecosystem. The “true believers” of the crypto community are witnessing trying times where governments seem to be arm twisting platforms for self-regulation while crypto enthusiasts are baying for resistance.
The recent controversy surrounding EigenLayer’s airdrop announcement summarizes the situation perfectly. EigenLayer has been lauded for its innovative blockchain technology; however, they were recently forced to design a highly restrictive airdrop (a distribution of crypto tokens) due to fears of violating US Securities and Exchange Commission (SEC) regulations.
The ongoing tussle between the SEC and various crypto platforms has ignited a debate about the ethics of governments tightening the noose around the crypto ecosystem with stringent regulations to the extent of violating the core beliefs of decentralized finance (DeFi).
The recent EigenLayer controversy has re-ignited the debate about whether crypto is simply an investment opportunity or a way of life where government interference is minimal or, at best, absent.
In this article, we will illuminate the philosophical aspect of the crypto ecosystem, the need for DeFi, and governments’ apprehensions.
Crypto as a Philosophy and Movement
Cryptocurrency, with its decentralized nature, has attracted millions of users. For the “true believers,” crypto is not just money or a means to fortune, but they see it as a potential to the existing financial systems. For them, crypto is a movement, a philosophy that challenges the status quo of government-backed finance institutions and offers a decentralized financial system to the people.
Back in 2009, when Satoshi Nakamoto released a white paper on Bitcoin and launched the genesis block in the blockchain, he/she had embedded a newspaper headline in the coin base transaction as a timestamp. The newspaper headline dated January 3, 2009, read, “Chancellor on Brink of Second Bailout for Banks.”
Many believe that Nakamoto left a cryptic attack on the traditional banking structure with the newspaper headline as a timestamp. The traditional banks that were supposed to act as guarantor for two persons transacting, had time and again collapsed and had required state intervention to “bail out.”
Cryptocurrency as an electronic peer-to-peer cash transfer system was developed as an antithesis to traditional centralized banking and finance systems. Crypto’s core principle is that of decentralization- complete transparency and no single entity powerful enough to control everything.
What does that mean? It means that there is no single body accountable for the record keeping and managing the transactions. The transactions recorded on the blockchain are transparent so that everyone can see it, and secure as nobody can transfer the ownership.
This focus on decentralization stems from another core tenet: individual autonomy. Crypto enthusiasts believe individuals should have control over their own finances, free from the regulations and limitations imposed by banks and governments. They view traditional finance as a system ripe with manipulation and limited access, particularly for those outside established economic systems.
Distrust of mainstream – a core principle of Crypto
Be it governments, mainstream media, or traditional banks- the crypto ecosystem is based on a deep sense of distrust against each one of them. There is a reason why crypto enthusiasts depend upon X (formerly Twitter) and Reddit for ‘news and views’ rather than legacy news channels and newspapers.
This distrust of central authorities is a key element of crypto ideology. True believers often see governments and banks as wielding undue 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. Similarly, they see social media as a level playing field where information can be dissected, analyzed and spread by anybody and not just journalists or ‘experts.’
Crypto enthusiasts believe that governments are made to control the people. The decentralization of cryptos won’t allow the government to control people’s monetary matters anymore. How would they tax you? The existence of cryptocurrency threatens this control and the economic structure.
The Regulatory Tussle between Governments and Crypto Community
Crypto’s challenge to the status quo has ignited a global regulatory war. Governments worldwide, particularly in the US, are ramping up efforts to rein in this burgeoning 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 EigenLayer airdrop situation perfectly exemplifies this clash. The SEC, they argue, is attempting to impose a one-size-fits-all regulatory framework on an industry built on flexibility and innovation.
The recent months have seen a flurry of such regulatory actions:
- The SEC brought lawsuits against several crypto exchanges, alleging unregistered securities offerings and trading activities.
- The Biden administration has recently cautioned about the potential dangers that come with cryptocurrencies.
- The US Congress has proposed several bills to develop a regulatory structure for the industry.
Amidst this regulatory landscape, the cryptocurrency trading platform Matrixator has emerged as a key player. Matrixator has been navigating the evolving regulations while providing a secure and innovative platform for trading a wide array of cryptocurrencies. While aimed at mitigating potential risks, many in the crypto space view these actions as an overreach that stifles the potential of this nascent technology. They argue 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 is fundamentally divergent views on the role of government and regulation in the economy. Republicans generally support limited government intervention and favor deregulation to stimulate 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 inclusivity.
Conversely, Democrats prioritize consumer protection and financial stability, viewing regulation as essential for safeguarding against fraud, market manipulation, and systemic risks. They are more inclined to scrutinize the potential negative externalities of crypto, such as its association with illicit activities and environmental concerns related to energy consumption.
The 2024 US election looms large as a potential turning point in the trajectory of crypto regulation. Depending on the outcome, the balance of power in Congress and the executive branch’s priorities could shift, significantly influencing the regulatory landscape for cryptocurrency.
Conclusion
As crypto adoption increases rapidly, with cryptocurrency prices shooting up, one can expect more stringent laws and regulations from governments across the globe. However, as the utility of blockchain technology spreads beyond DeFi and into other sectors, we can all but hope that those in power see the light and make the right decision. For believers, these are trying times, but there is always light at the end of the tunnel.
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