Never Let a Good Crisis Go to Waste: In the Wake of the FTX Crash We Must Resist Regulations in The Crypto Market

by Curious Josh

As you have probably heard, one of the cryptocurrency exchanges - FTX - crashed and filed for Chapter 11 bankruptcy this week.

Immediately following the demise of FTX, social media was lighting up with posts calling for better regulation of the crypto market. But let’s pump the brakes and really think about what that means.

Regulation (as we know it) requires centralization, and that would be in direct conflict with the sage sprit of what the mysterious founder of Bitcoin - Satoshi Nakamoto - had in mind when he created it.

“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party,” Satoshi said. “The root problem with conventional currency is all of the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

The lack of trust in centralized entities that control our systems is at the root of most of our problems today, as we have written about many times including here and here. This lack of trust now spans government, media, education, health care, medicine, religion, finance, academia, and even science. People no longer trust most of these institutions.

Those who really understand the power of decentralization know that it is the one tool we can use to defang all of these dangerous centralized entities peacefully. If this concept is new to you check out this article or dive down this amazing rabbit hole with the wise Balaji.

The problems with FTX had nothing to do with Bitcoin or any other truly decentralized cryptocurrency. The problem was people put their trust in FTX - a centralized entity - to guard over and manage their assets. With their lack of transparency it isn’t totally clear what FTX did wrong, but we shouldn’t have ended up in this situation anyway. The purpose of Bitcoin was to create a “trustless” society, where trust is just a given, and not part of the equation of iterations as we collaborate together.

In order to avoid having to trust centralized entities like the FTX exchange, what we should be doing is storing our digital assets in “cold” or “self custody” wallets such as Ledger, Exodus Wallet, or MyCelium. There is no trust required when you use these, except with yourself (don’t lose them). If an exchange goes bankrupt, it is irrelevant to your assets.

To more dismay, there was even some online chatter about bailouts. Have we not learned our lesson? We are all still paying the long term price from bailouts that happened 15 years ago (inflation, for one). Instead, we should just let FTX fail. Sure, there will be pain for those who lost money or jobs with them, and we should empathize with those people. But a decentralized market should be “Caveat Emptor” (buyer beware). By simply letting FTX fail it will force exchanges to be better in the future - to evolve - and to show transparency in all of their work. Would you rather use an exchange that was secretive and opaque? Or one that had a visible ledger for all to see, and a proof of reserve? Or better yet, how about an exchange that was also decentralized?

The root problem isn’t that an exchange defrauded the users, or that it sneakily used fractional reserve banking for crypto the same way a centralized bank would. The root problem is that we allowed them to be able to. We didn’t have to. As Satoshi put it, “Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. (With Bitcoin) the result is a distributed system with no single point of failure. Users hold the crypto keys to their own money and transact directly with each other.”

In other words: The problem here wasn’t a failure with the decentralized crypto. It was a failure with one of the centralized exchanges.

We cannot allow the crypto market to become regulated. Decentralization is the frontier of the next revolution of mankind. It is the way to freedom and prosperity in all areas of life. The applications for it go well beyond finance. Centralization is the opposite. It is the path to programmable Central Bank Digital Currencies (CBDCs), a social credit system, and the ability to “shut off” anyone at any time.

If you care about decentralization this should disgust you:

Edward Snowden @Snowden

Opportunistic serpents.

Disclose.tv @disclosetv

NOW - White House: "Regulation of cryptocurrencies is needed." https://t.co/01C9VYkff4

Thanks for reading!

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About the author:
Josh R. Ketry - Strategy and Systems Director & Consultant - is an advocate for freedom, human growth, and human potential. A Brazilian Jiu Jitsu blackbelt and Academy owner. Growth Mindset student (for life). Entrepreneur. Writer. Philosophy fan. Long-time carnivore diet practitioner for autoimmune issues. Birder. Muskie fisherman. Photographer. No topic off limits. Thank you for reading!