As Bitcoin bounces over $40,000, regulators are circling the blockchain in what looks like a coordinated attempted to rein Crypto in.
Blockfi, is just one example of a high profile fintech on the receiving end of the regulators focus. Blockfi provides a savings and loan type product where customers can lodge their Crypto to earn interest and use it as collateral to borrow ‘fiat’ and to trade/swap/convert (however you want to define that) one crypto into another. It has raised a lot of cash at lofty valuations, so it has a proper predigree.
New Jersey, Texas and Alabama regulators are all on the war path of cease and desist and its not hard to see why.
Its simple, you can get 5% interest on your US dollar stable coin deposits and why wouldn’t that put the noses out of joint of all those old-style banks, happy to pay you zippo interest and charge you 18% (if you are lucky) on your credit cards, while getting cash for free from the Fed. Blockfi and other systems like Celsius strike right to the dark heart of old school banks.
The red herring that the regulators are pressing is the Blockfi is selling securities, which seems to be an accusation based on the idea a security is whatever the regulator says it is. Blockfi says a Crypto deposit account that pays interest is not a security and has been given leave to argue its case. I use Blockfi and I cant see they have sold me a security, their system is just like any savings account I’ve ever had. However my argument won’t help the regulator get the cat back in the bag or stop people rushing to get 5% interest on their money.
Today Blockfi has just announced that the New Jersey regulator has pushed the moment of truth back from the end of July to September the 2nd, giving Blockfi sometime to fight its corner in New Jersey.
This is a small piece of good news.
The whole idea of Blockfi runs against decentralisation idea of Crypto and there are decentralised system like Blockfi out there. But I like my money to be held by known players under regulatory regimes. Decentralisation is an idea, because it gets around these sorts of problems without a ‘by your leave.’ As such Blockfi is being punished for playing by the book, an irony that won’t be missed by less conservative operations who will stay aloof and offshore.
The key to all this though is bigger, the countries that try to murder Crypto will put themselves in the tail end of the huge wealth and benefits that blockchain technology will create. Already Crypto has generated the wealth equivalent to an Apple or an Amazon and that process has only just begun. The US has till now been in the vanguard of creating and setting loose new, fashionably called ‘disruptive’ technologies and if it hadn’t what a mess it would be in now.
If Crypto is to become the beginning of the end of this trail blazing process for the US, it will, like China, have handed over the development of the future titans of commerce to another economy and Apple etc, will bookend the end of an era of economic dominance that so many are now predicting.
Upsetting the applecarts of banking, might terrify regulators but the ending of American technological hegemony by suffocating the latest technological revolution, will be truly a catastrophic tragedy. But thus did Rome fall.