“A paternalistic and lazy regulator settles on a solution like this one: do not initiate a public process to develop a workable registration process that provides valuable information to investors, just shut it down.” – Hester Pierce, SEC Commissioner.
“Gary Gensler’s regulatory purgatory strategy hurts everyday Americans the most – leaving them in the dust while these opportunities are accessible offshore.” – Tom Emmer, House Majority Whip.
“The current crypto crackdown is being sold as a ‘safety and soundness’ issue for banks, and not merely a reputational risk issue. Jake Chervinsky of the Blockchain Association calls it ‘regulation by blog post.'” – Nic Carter formerly of Blockchain.com, now a VC.
“The securities laws… they’re good for investors.” Gary Gensler, Chair of the Securities and Exchanges Commission (SEC).
In a capitalist society, if you are unable to grow your capital, then you have no say in the democratic process where capital dominates.
The title therefore might sound dramatic, especially as it concerns some managed staking, but what is happening here goes far beyond that specific issue or indeed crypto. Instead this is a point where a generation asks whether we do or not collectively end what is basically governance by thugs rather than the rule of law and due process.
There’s a 2018 documentary film on Dick Cheney, the former Vice President under George Bush, called Vice.
It points out the unstoppable abuse that a position of power in governance can allow due to individuals choosing not to follow due process and the rule of law, and they are able to do so because there isn’t quite anyone to stop them, in US not even the judiciary.
A cowboy, commentators used to call Bush, but a thug is a better description because he had complete disregard for… well the enlightenment basically and the entire framework for an accountable and limited government.
The legacy of that lives on under Vladimir Putin who has ‘perfected’ the art of thuggery, as we might call it, whereby the rule of law is now pretty much non-existent in Russia with the consequences being fairly dire as this is now a country in a war of choice right on its borders.
Only a decade ago, this was a country that was a liberal democracy. Since ancient times however it has been known and very well that democracy is fragile. It needs a demos, a people or a public, for it to function, and if the public does not assert the limits of governance, then there is no limit.
Democracy is most fragile during war, and so perhaps one can understand why Bush was able to get away with much, though it was unacceptable and the public did not accept it to the point it eventually revolted in Brexit and Trump.
Yet the legacy of this ability and willingness to abuse a position, clearly remains. Peace afterall, where our own peoples are concerned, is still very new. And yet it is time to ask whether we now have to put an end to this culture of abuse that has gone on for the past two decades.
US, The Cold Democracy
The United States’ civil service stands out among western democracies as being very cold to this space, and even deaf.
Why? Well fundamentally it may well be because only Congress can hold the US government and its agencies to account, and Congress is not quite functioning.
“It’s the year 2028, hundreds of thousands of Americans have been jailed for using illegally cryptocurrency instead of CBDCs, and Hester Pierce is still just writing dissenting memos.”
So says LBRY, a project that recently had the judiciary decide its token is a security and therefore requires permission from the SEC.
Unlike in the United Kingdom therefore, where you can rely on the judiciary, you clearly can not in US as judges are politically appointed, which is a terrible state of affairs.
Without direct accountability from the public itself in court, defended by a fiercely independent judiciary, it may well be that the civil service does not need to care about the public.
Only Congress matters and Congress is not working. So we are watching, without public consultation, due process, or even the rule of law, the imposition of a prohibition not just on capital formation, but capital growth, and that’s only for the public, not the rich.
From this statement you understand very well why inequality is growing and why the middle class is dwindling. They are unable to participate in the capital gains of technological advancements because they are prohibited from advancing such capital.
The crowdfunding wave in the early 2010s that could have led to a very different internet, was prohibited by the same securities laws which shut out the public from having a stake in the likes of Facebook or Twitter, until they were publicly traded vast giants with comparatively little capital gains left.
They want to do the same to crypto and have been trying since 2018. The advantage we have however is first that we’re not distracted by a war of Bush’s choice, and second that we don’t need platforms. The blockchain is the platform and therefore one can operate even fully anonymously as Satoshi Nakamoto continues to prove.
So it won’t be as easy as with crowdfunding to impose this one rule for the rich and another for the rest, both technically but also politically in as far as this is a very different generation from generation X, or generation no name as we call it.
Their formative years were in far less cynical circumstances and their denial lasted for far too long. While this generation knows very well the cost of being apolitical.
Of course from Gensler’s point of view him giving permission is “good for investors.” His predecessor used to say America is the best, has the best market, but the greying skyscrapers tell a different story.
This generation can not afford such complacency, as the civil service clearly thinks it can, because the digital transformation is at full swing and only fools would predict just how it develops as we are in the midst of an industrial revolution.
There can be different ways of striking the right balance, including UK’s approach where disclosures are required, but not permission.
The Biden administration however is clearly unwilling to entertain such economically liberal approaches, choosing instead to impose the discriminatory prohibitions without even a debate among the law makers.
And the stakes are fairly great, because if the public is shut out from promising opportunities for capital growth – though here to a limited extent for only what they think they can politically get away with – then US may develop into a two class society, an aristocracy or even worse.
Time to Shake Biden?
And so we get to the most difficult point because a society is far more complex than just crypto and there are things that can affect crypto far more than some managed staking.
Defeating nationalists, by Ukraine winning what is effectively a war for liberalism in the Enlightenment sense, is far more important as nationalists would probably take the same approach as China towards crypto, if not worse.
They don’t like liberty at all, and although Putin himself is crypto friendly, his western versions probably wouldn’t be from what we have seen in the past few years.
And so when it comes to Biden and the presidency, it’s a tearing choice whether we should replace him because he has been even excellent so far on foreign policy – ignoring maybe the protectionism fight with the EU over subsidies – but he is somewhat weak on the economy.
And you can say there’s consensus on Ukraine, but few have his experience. Making it very tempting to brush this staking episode under the rug.
But should we? Would a gamble be more tempting and constraining on the current administration. Constraining in as far as if Biden thinks there’s a real chance he only has two more years, maybe he’ll speed up a Ukrainian victory especially in light of ‘elections’ next year in Russia.
And yet Biden is popular whatever his faults. He has repaired US’ image abroad, but can the economy wait, are there ongoing processes which would be too much to let continue running.
Our judgment overall at this point is to settle for a warning. The crypto industry and the wider Silicon Valley can go to Ron DeSantis, offer him support in return for making Hester Pierce chair of the Securities and Exchanges Commission.
With full backing, the unelectable Trump would be just a sideshow, and Biden may well lose just on the account of age, if nothing else.
Holistically, at this point however it is not something that would court the natural conclusion. Obviously it’s for DeSantis himself to decide and the wider crypto industry, but it may well be that there are better returns in Congress.
Unlike the Presidency, Congress at this point has nothing to focus on but the economy. The firing shot by Republicans on the debt ceiling, therefore, is a good play. If they keep that focus, Trump may be ignored as some sort of theatre, and voters might even give them control of the houses in 2024 while perhaps keeping Biden, certainly if Trump is the choice.
It is Congress afterall that has passed this discriminatory Securities Act 1933 that in this digital age is chaining the United States.
It may have made sense a century ago, but to grab new opportunities and efficiencies in an age of globalized communication, it needs significant amendments.
Unlike the civil service which answers to the President, Congress is accountable to the public. And therefore Congress is far more crypto friendly than any other branch, though still a fairly ‘foreign’ creature to this space.
So maybe getting a bit more familiar with Congress is the best approach. They’re a diverse bunch and in US they’re the only independent institution from the government, and therefore finding out the answer there is worth it.
Difficult, maybe slow, but potentially rewarding as it’s the right place to have a debate on the economy, and we don’t have to make wholistic choices because we can just focus on our own business.
Congress will maybe understand that the new generation has different views on economic liberty, and that it should be empowered to in the open engage in digital entrepreneurship and innovation, without permission slips from captured bureaucrats.
At the very least, it would open a debate and a debate on the economy is exactly what we need right now, especially with an upcoming recession.