The mere fact that something is “new” doesn’t make it valuable or unworthy of scrutiny .Big Crypto is in the midst of a big reckoning. Following a series of spectacular Crash After the collapse of two of the largest and most profitable crypto companies last year — Coinbase, and Binance — US regulators sued them on consecutive days in this month. Ripple Labs is still fighting an action brought against it by 2020, despite spending more than $100mn on legal fees.
The scammers and conmen who are the most obvious in cryptoland are not being targeted (there are plenty of them, but they are usually small fry). The companies being targeted are those that have made every effort to appear legitimate. They have tried to be palatable for regulators, Silicon Valley, and politicians.
They are the suit-and-booted types who dine with presidents, and snuggle up to Tory MPs who are also Z-list celebrities at the House of Commons. These are the types who brag about ” great meeting ” with the Economic Secretary to the Treasury, and who write altruistically that Britain should ” put Web3 and Blockchain at the centre of government ” (groan).
The ” reasonable crypto ” crowd has been relentlessly pushing crypto, framing it as an “innovation” which countries must embrace to avoid being left behind. They and their supporters are now trying to fight against the US Securities and Exchange Commission crackdown by using the same rhetorical arguments: any move to punish or regulate the Wild West crypto will stifle the “innovation”.
“The SEC wants to kill crypto-innovation in the United States,” Ripple CEO Brad Garlinghouse stated in a social media video last week after documents related to the SEC case against his firm were released. Tim Draper, venture capitalist and friend to another famous innovator — the incarcerated Fraudster Elizabeth Holmes — said on Fox Business last weekend that “the SEC is creating an environment hostile to innovation.”
This charge is so prevalent that even the SEC had to deny it explicitly: “We’re not here to stifle innovations, we’re here to stifle fraudulent activity,” said the SEC director of enforcement last week.
What do we mean by innovation? It is defined by the Cambridge Dictionary as “a new method or idea”, or “the creation and use of new methods or ideas”. The way it is used, however, is to describe a “technical thing nobody understands that could one day be useful or make money”.
Paris Marx, the host of the Tech Won’t save Uspodcast tells me that it is very effective for the industry when they frame each technology, whether it be crypto, generative AI or anything else, as an innovation we should pursue. “But Silicon Valley, and venture capitalists, are not interested in developing technology to improve society,” says Paris Marx. . . They are interested in making money from the next hype cycle.”
The problem with innovation can be that, while it may seem new, the solution isn’t very useful. For example, Blockchain technology. Sometimes the innovation is not only harmful, but also has its benefits. Synthetic opioids, for example, have helped millions of Americans with their pain, but have also caused an overdose crisis that will kill almost 80,000 Americans by 2022, and have pushed the US life expectancy to , a 25-year-low.
Why do we see “innovation” so unambiguously as a good? And why is “stifling it” so bad? The objective of an innovation, and its possible consequences, should also be considered. We may be able to make progress in many areas such as science or medicine, but it seems that we have gotten to the point where we are praising ideas themselves. This is a mistake: Innovation should not be viewed as an end unto itself but rather as a way to make something better.
Crypto may be innovative, but this does not mean it is valuable or useful to society. We can’t continue to believe that innovation is always a good thing. In reality, “innovation” is often nothing more than exploiting the gaps in the existing rules until regulators catch-up — a strategy called “regulatory arbitration”, which the crypto industry has used and relied on with great success. Regulators are now catching up with these clever crypto “innovators”.