Vitalik Buterin, the creator of Ethereum, chimed in on the controversy around crypto legislation and provided his most “controversial” thoughts. This argument is gaining popularity on social media thanks to the participation of notable crypto personalities.
Vitalik Buterin categorized restrictions as internal and external attempts to control cryptocurrency. The first method is “far worse” for cryptocurrency since it attempts to “intrude” into cryptocurrency companies and projects.
The Securities and Exchange Commission (SEC) of the United States is adopting this strategy. According to the Blockchain Association, the regulator has been implementing “regulation by enforcement” under the direction of Gary Gensler. The SEC is attempting to categorize nearly all cryptocurrencies as securities.
If the SEC is successful in its efforts, crypto firms may be required to comply with existing U.S. regulations, posing major barriers to innovation. Regarding the SEC’s strategy, the Blockchain Association recently stated:
(…) The SEC must follow the law, they cannot impose their draconian view on the entire crypto ecosystem through an enforcement action
Vitalik Buterin Dismantle Crypto Regulation
Vitalik Buterin, the creator of Ethereum, began categorized crypto regulations according to their ultimate purpose. These goals are ostensibly designed to safeguard customers and deter criminals from engaging in money laundering.
The permissionless characteristic of decentralized finance (DeFi) protocols dominates most of the crypto regulatory discussion. Regulators and government agencies assert that these platforms enabled criminals to circumvent established payment channels, so facilitating money laundering and other illegal acts.
Vitalik Buterin, however, argues that these risks are not “concentrated in DeFi,” but rather in centralized crypto firms, such as exchange platforms. Know Your Customer (KYC) and anti-money laundering (AML) rules must be implemented by these businesses to prevent illicit actions.
In this way, they are controlled and adhere to their ultimate goals: protecting their clients and preventing illicit activity. Vitalik Buterin therefore advocated a regulatory structure that could be more advantageous to DeFi protocols.
No KYC Regulation, No Institutions
Vitalik Buterin believes that imposing KYC standards on DeFi networks may therefore undermine the two primary aims of laws. They would forcibly remove users from the protocols while taking no action against malicious actors. The creator of Ethereum elaborated:
Hackers write custom code to interact with contracts already. Exchanges are clearly a much more sensible place to do the KYC, and that’s happening already.
Changpeng Zhao, CEO of Binance, and Sam Bankman-Fried, CEO of FTX, were among the crypto industry executives that welcomed this “controversial” opinion. The latter faced criticism for his opinion on cryptocurrency rules.
Buterin identified institutional capital as one of his other “controversial” beliefs. These funds should not be pursued with “enthusiasm” until the young sector matures.