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Why are cryptocurrencies the defining political issue for true believers?
Consider it pure joy, my brothers, every time you face trials of various kinds, because you know that the test of your faith produces perseverance.”
– James 1:2, The Holy Bible.
The above Gospel, taken from the Bible, aptly summarizes the current state of affairs within the crypto ecosystem. “True believers” in the crypto community are witnessing troubled times where governments appear to be manipulating self-regulating platforms while cryptocurrency enthusiasts call for resistance.
The recent EigenLayer airdrop controversy The announcement sums up the situation perfectly. EigenLayer has been praised for its innovative blockchain technology; however, they were recently forced to engineer a highly restrictive airdrop (a crypto token distribution) due to fears of violating U.S. Securities and Exchange Commission (SEC) regulations.
The ongoing dispute between the SEC and various crypto platforms has sparked a debate over the ethics of governments tightening the noose around the crypto ecosystem with regulations that are stringent enough to violate the core beliefs of decentralized finance (DeFi).
The recent controversy over EigenLayer has reignited the debate over whether cryptocurrencies are simply an investment opportunity or a lifestyle 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 the apprehensions of governments.
Cryptocurrency as a philosophy and movement
The cryptocurrency, with its decentralized nature, has attracted millions of users. For “true believers”, cryptocurrencies are not just money or a means to make a fortune, but they see them as having potential for existing financial systems. For them, cryptocurrencies are a movement, a philosophy that challenges the status quo of government-backed financial institutions and offers people a decentralized financial system.
In 2009, when Satoshi Nakamoto published a white paper on Bitcoin and launched the genesis block into the blockchain, he had embedded a newspaper headline in the coin’s base transaction as a timestamp. The newspaper headline dated 3 January 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. Traditional banks, which were supposed to act as guarantors for two people carrying out transactions, collapsed several times and required state intervention for “rescue”.
Cryptocurrency as a peer-to-peer electronic money transfer system was developed as an antithesis to traditional centralized banking and financial systems. The fundamental principle of cryptocurrencies is that of decentralization: complete transparency and no single entity powerful enough to control everything.
What does it mean? This means that there is no single body responsible for keeping records and managing transactions. Transactions recorded on the blockchain are transparent so everyone can see them and secure because no one can transfer ownership.
This focus on decentralization stems from another fundamental principle: individual autonomy. Cryptocurrency enthusiasts believe that individuals should have control over their finances, free from regulations and limitations imposed by banks and governments. They view traditional finance as a mature system, subject to manipulation and limited access, particularly for those outside established economic systems.
Distrust of the mainstream is a fundamental principle of cryptocurrencies
Whether it’s governments, mainstream media, or traditional banks, the crypto ecosystem is built on a deep sense of mistrust towards each of them. There’s a reason cryptocurrency enthusiasts depend on 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 view governments and banks as exercising undue control over the money supply, leading to inflation and economic instability. Cryptocurrencies, with their predetermined issuance schedule and limited supply, offer a potential alternative: a system less susceptible to manipulation. Likewise, they see social media as a level playing field where information can be dissected, analyzed and disseminated by anyone, not just journalists or “experts.”
Cryptocurrency enthusiasts believe that governments are meant to control people. The decentralization of cryptocurrencies will no longer allow the government to control people’s monetary matters. How would they tax you? The existence of cryptocurrency threatens this control and economic structure.
The regulatory dispute between governments and the crypto community
Cryptocurrency’s challenge to the status quo has triggered a global regulatory war. Governments around the world, particularly in the United States, are stepping up efforts to rein in this rapidly expanding 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 cryptocurrencies. The EigenLayer aircraft launch situation exemplifies this clash perfectly. The SEC, they argue, is attempting to impose a one-size-fits-all regulatory framework on an industry built on flexibility and innovation.
The last few months have seen a flurry of such regulatory actions:
- The SEC has filed lawsuits against several cryptocurrency exchanges, alleging unregistered securities offerings and trading activities.
- The Biden administration recently warned about potential dangers from cryptocurrencies.
- The United States Congress has proposed several bills to develop a regulatory framework for the industry.
In this regulatory landscape, the cryptocurrency trading platform Matrix has emerged as a key player. Matrixator has navigated evolving regulations while providing a secure and innovative platform for trading a wide range of cryptocurrencies.
While aimed at mitigating potential risks, many in the cryptocurrency world see these actions as overreach that stifles the potential of this nascent technology. They support regulations that promote innovation by addressing legitimate concerns rather than stifling the entire industry.
The partisan divide between Republicans and Democrats
In the United States, support for cryptocurrencies 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 cryptocurrency regulation in the United States.
The partisan schism over cryptocurrency is due to fundamentally divergent views on the role of government and regulation in the economy. Republicans generally support limited government intervention and favor deregulation to spur innovation and economic growth.
In this context, cryptocurrencies represent a symbol of financial freedom and decentralization, aligning closely with the republican ethos of individual freedom and the free market. Many Republican lawmakers and supporters see cryptocurrencies as a tool to challenge the dominance of traditional financial institutions and promote financial inclusion.
In contrast, Democrats prioritize consumer protection and financial stability, viewing regulation as essential to safeguard against fraud, market manipulation and systemic risks. They are more likely to carefully examine the potential negative externalities of cryptocurrency, such as its association with illicit activities and environmental concerns related to energy consumption.
The 2024 US election looms as a potential turning point in the path of cryptocurrency regulation. Depending on the outcome, the balance of power in Congress and the priorities of the executive branch could change, significantly impacting the regulatory landscape for cryptocurrency.
Conclusion
As cryptocurrency adoption increases rapidly, with cryptocurrency prices soaring, you can expect stricter laws and regulations from governments around the world. However, as the utility of blockchain technology spreads beyond DeFi and into other industries, we can almost hope that those in power will see the light and make the right decision. For believers these are difficult times, but there is always light at the end of the tunnel.