Sam Bankman-Fried came under fire this week after proposing to regulate decentralised finance (DeFi), including by proposing to blacklist certain addresses. After several days of heated debate, the FTX CEO has revised his paper, but it is still not convincing.
Sam Bankman-Fried wants to regulate DeFi
Last week, Sam Bankman-Fried, the CEO of cryptocurrency exchange FTX, published a nearly 4,000-word paper entitled “Possible Industry Standards for Digital Assets,” which proposes solutions to better “regulate” decentralized finance (DeFi).
In order to limit the number of intermediaries, to find a solution to censorship, and above all to find an alternative to the centralisation of banking power, an alternative has emerged under the name of decentralised finance. To find out more about this evolution that gives power to the user, read our fact sheet dedicated to the presentation of DeFi.
In this paper, Sam Bankman-Fried has argued for regulation based on a system of blocklists and blacklists, through which any sanctioned individual would no longer be able to trade in a so-called decentralised finance ecosystem.
To balance his point, SBF said that a system of lists could be a brake on innovation, but on the contrary, letting individuals do what they want without being sanctioned in return would lead to financial crime being unleashed online. He supports his point by saying:
Maintaining a blocklist is a good balance: it prohibits illegal transfers and freezes funds associated with financial crime while allowing trade. Everyone should abide by OFAC’s sanctions lists (which, by the way, is already the law). “
Speech that sparked controversy
Unsurprisingly, SBF’s proposal to regularise decentralised finance, which by definition is supposed to be totally devoid of any authority from anyone, has received its share of criticism.
Many DeFi actors, like @scupytrooples, the founder of the Alchemix protocol, have spoken out against Sam Bankman-Fried’s proposal.
Minted fake tokens on ftx to game balancer farming
Attempted sushi takeover
Listing perps on illiquid DeFi tokens to aid in their farm and dump effective altruism
Suspected of liquidation hunting
Low-ball CeFi bids post crash
Lobbying against DeFi
Not a good look bro!
– scups mctroops (@scupytrooples) October 20, 2022
” Making fake chips on FTX to play balancing act. Attempting to take over Sushi. Listing perpetual contracts on illiquid DeFi tokens to support them in their efficient farm and dump altruism. Suspected of liquidation hunting. Cheap offers on CeFi after the crash. Lobbying against DeFi. Not a pretty sight, bro!”
In an interview with fellow media outlet The Block, he drives the point home and indirectly calls SBF a parasite on the crypto ecosystem:
“I see them using the playbook of big business, where they rise to the top, then get involved in lobbying to get the rules in their favor so they can hurt the competition, and ultimately cement their position. He has publicly stated that he doesn’t care about crypto and is only in it for the money. It is quite obvious to see that he is not a good player in this space. “
Similar to this is @sassal0x, well known in the Ethereum blockchain (ETH) ecosystem, who posted a scathing message to his 225,000+ Twitter followers, about the FTX CEO:
SBF is and always will be a cancer in this ecosystem. Anyone who supports him and his cronies should be ashamed. “
SBF says it is ready for dialogue
After many rather heated debates on Twitter, Sam Bankman-Fried wrote a long thread on Twitter to “thank in particular those who had highlighted the heart of crypto, financial freedom.”
SBF explained that it had modified its initial document to take into account the various feedbacks of the last few days, while specifying that the aim of the manoeuvre was not to constrain developers operating in the DeFi sector, but simply to establish guidelines concerning the link between this world and the various regulated platforms (following the example of FTX).
He states that “validators and smart contracts should be free, permissionless and decentralised”. However, the FTX founder’s plea is far from convincing everyone:
This is a subtle point u less you know what you’re reading: it should *never* be the case that there is a mandate to access DeFi through a centralized intermediary’s interface.
Devs should be allowed to build whatever interfaces they want https://t.co/pfgBifzTfO
– señor doggo ☠️ (@fubuloubu) October 23, 2022
“This is a subtle point, unless you know what you’re reading: there should *never* be a mandate to access DeFi via a centralized intermediary interface. Developers should be allowed to build the interfaces they want. […] If you don’t think it’s a big deal, do you want to do a KYC to use Etherscan? Because that’s exactly what he’s advocating. “
After a very mixed reception from the crypto community, it remains to be seen whether Sam Bankman-Fried’s wishes for regulation will see the light of day in the future, or if they are even feasible.
