Clash of the Crypto Titans

On Friday, Bankless hosted an intellectual sparing session between FTX founder Sam Bankman-Fried (SBF) and founder of ShapeShift Erik Voorhees. The debate lasted almost two hours and the pair clashed on the hottest topic in all of crypto. How should crypto be regulated? 

• Clearly, both inherently agree on what decentralised finance should be. The entire idea of DeFi is to create a financial system where everybody, regardless of social standing, can have permissionless access to and control over their money.
• The pair believe that the protocol layer must remain unregulated in order to do this, meaning no asking for permission to deploy smart contracts. They also agree that centralised exchanges and intermediaries should be subject to regulation. But this is where the agreement ends.
• SBF argues that the industry should comply with the Office of Foreign Asset Control (OFAC) sanction lists. To do so, crypto companies and projects should proactively maintain “blocklists” of wallet addresses committing illicit activity and ensure these wallets do not interact with their platforms. Whereas, Erik argues that “this is not just absurd from an enforcement perspective, but plainly unethical“ as the OFAC list includes entire countries.
• SBF is also open to accepting regulatory licensing of DeFi’s front end. In practice, this would mean that DeFi protocols would need to apply for a crypto license with some sort of “Department of Crypto Consumer Protection”

If the protocol layer is allowed to innovate, SBF sees this as a reasonable compromise with the authorities, but Erik thinks that would be too significant a political surrender. This is where the pair have their greatest difference in opinions.