Crypto vs Regulators: This “Final Boss” Fights a Bit Different!

Earlier this month, The Republic of the Marshall Islands made some news promoting the country’s nationally recognized cryptocurrency, the SOV.

The SOV is supposed to be the world’s first sovereign cryptocurrency. They have been working on the idea for some time and seem to be paying lip service to diplomacy with the “good guys” like the IMF and UN. Compare with other “bad guy” sovereign crypto projects like the Petro in Venezuela.

Three general observations here:

• We’ve written before about how governments use crypto as the flavor of the day for regulatory arbitrage, and this is a good example. The Marshall Islands — which happens to be a player in the offshore company regulatory arbitrage game as well — is putting itself on the map of the future of finance and drawing attention from crypto investors and other people who may not have thought much about the small island country before.
• The country has a pragmatic reason for launching the SOV too. There is only one established bank-to-bank route — technically, a correspondent banking relationship — for getting US dollars into the economy. This route is at risk of being cut off according because of ever stricter US money laundering rules. That means they’ve got all their traditional banking eggs in one basket. Any alternative is better than no alternative, right?
• The IMF came out against the SOV in a report a few months ago, citing financial instability and so forth. In other words, please keep your international finance eggs in one basket because… cryptocurrencies are not under the right people’s control.

The approach the IMF took here is what we think is really interesting! Here’s why:

Crypto’s “boss fight” is supposed to be with regulators — except this is not your classic head-to-head combat.

As you probably know, at the end of most video games you have to face a final battle with a “boss,” the ultimate bad guy.

Naval Ravikant has said that crypto’s boss fight is with governments. Basically, we agree!

Bitcoin, the original gangsta blockchain, was designed essentially to fight the central banksters — who most crypto fans believe are the real power behind most country’s regulators.

But… we don’t see regulators going head-to-head with blockchain technology on technological turf. It isn’t rational.

That, of course, is our opinion and somewhat debatable. After all, world governments have virtually unlimited resources — including more computing power than you might be able to conceive — to put towards controlling cryptocurrencies. The argument is, for example, that with enough resources they could control 51% of Bitcoin mining activity and effectively take over the blockchain.

But that’s the hard way. Any strategist — and governments are full of them — will tell you not to attack your enemy on their familiar ground. And technology is obviously the cryptosphere’s home turf. If you’re interested in this debate, check out this great video from Andreas Antonopoulos on state-sponsored attacks on crypto.

Existing regulatory frameworks are more rational weapon to attack crypto with — but they’re tricky because of jurisdictional arbitrage.

We don’t believe governments are all necessarily bad, per se :)

There are actually regulators who want to make things better, ensure that things run more efficiently, strengthen their local economy, and so forth.

Success stories do happen! Usually the most noteworthy are in smaller jurisdictions, like the Marshall Islands as before.

Again, a lot of this has to do with regulatory arbitrage. Some places are quicker to develop crypto-friendly rules than others.

It even happens within countries. We wrote about Wyoming a while ago, and then Nevada is also jumping on the crypto-friendly legislation bandwagon. In comparison, New York’s Bitlicense regime is generally considered a pain. Or in Russia — where there seems to be a new government position on cryptocurrencies every few months — there may be a new special economic zone for crypto activities.

To understand why that’s important, let’s go back to the video game analogy. Imagine that in a video game the final boss was waiting to destroy you, but the sub-bosses at the lower levels weren’t totally working for him. Maybe they didn’t fight as hard, or left a powerful weapon lying around for you to find. Doesn’t make much sense, does it?!

Well that’s basically what is happening with world governments. You’ve got the top establishment — let’s say it is the transational central bankster Bilderberg types — and the local governments who have their own interests.

That means that to a certain extent regulations will work to slow down crypto adoption and make it annoying to be involved. Binance will soon be officially shutting off access to US customers, for example. Most likely because of federal-level securities rules.

But the regulations won’t really kill crypto. People will just go somewhere else with better regulations. The cryptosphere is largely digital, right?

The establishment’s weapon of choice will be propaganda, i.e. relatively soft-touch recommendations and insinuations that are supposed to cause internal conflict and doubt.

One of our favorite videos on real spycraft and psyops is from this KGB defector. The basic idea he discusses is that you don’t want your opponent to play as a team. You want them have multiple internal factions, fight amongst each other, doubt each other, and so forth. If they’re busy fighting themselves they won’t be able to fight you very well!

Remind you of a certain country after a certain election? That the Russians are supposed to have messed with? OK, we won’t get political :)

The point is that we expect to see more more-or-less subtle recommendations that crypto is unstable etc. from quasi-governmental sources like the IMF — just like they put into their Marshall Islands recommendation.

We don’t actually think they’re really turned on the propaganda machine yet, to be honest. When they do, you’ll know it :) You’ll see stories all over the place.

We’re not exactly sure what the specific messaging will be when they do. So far, we’d say their best PR success was painting Bitcoin as black market money for drugs and money. We don’t think the story is sticking — especially if you consider that Bitcoins are more traceable than fiat cash.

Anyway, we’ll just have to wait and see.

So be skeptical about “us vs them” arguments in the cryptoshere.

Makes you think twice about the big Bitcoin fork argument a while back, huh? Was it really that big of a deal?

Sure, some crypto projects will be more interesting to you than others. And some are straight up scams — just like in life outside the cryptosphere.

Do your due diligence and pick your own path — because in the cryptosphere you can!

But remember that while emotions serve a great purpose (we’re excited about what we’re doing at BlockStamp and it helps our work!) they shouldn’t distract you from seeing the big picture.

In the “crypto game,” the final boss wins by riling you up about trivialities that may seem super important today but ultimately distract you from seeing the new crypto paradigm!

About BlockStamp:

BlockStamp is a multipurpose Bitcoin blockchain fork developed to promote liberty, transparency, and sovereignty in areas of the digital economy where these fundamental values are most at risk. BlockStamp hosts a radically fair gambling platform, a digital tool for transparently sealing data, a censorship-proof internet Domain Naming System, and the BST crypto coin.