SEC Accuses Binance of Mishandling Funds and Lying to Regulators
nytimes.com
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Those who say that CEXs aren't part of the core values of cryptocurrency are right, except also completely ignorant to the fact that without CEXs, crypto's usability as a currency is practically 0.
CEXs have failed, hardware wallets have failed, soft wallets have failed, seed phrases are fundamentally problematic, etc.
Cryptocurrency won't ever be functional on a large-scale as a global currency, and that much is evident. It's not even a matter of opinion; the core idea of decentralization which "makes crypto great" makes it unusable as a currency for the vast majority of people- who would need to rely on some centralized authority in order for crypto to operate within the real world.
Anybody left in the space must just be hanging onto greater fool theory, that or has drank the kool-aid.
I don't think it's a very good currency (in the tx time/volume sense), but I think viewing crypto's viability as an all-or-nothing game is unreasonable--that includes both those for it and those against it. As for your assertions about failures:
- CEXs have failed (in the worst way possible too, see MtGox, BTC-e, FTX), but that doesn't mean they have all failed--or that there isn't a future for them.
- Hardware wallets haven't failed at all really. Like, Trezor and Ledger are the largest I think, and those are fine AFAIK. Are you referring to Ledger's recent news with the optional update including a backdoor for those that want to sync keys with Ledger's new service? (Seems like a dumb business decision imho, seems oxymoronic--hardware wallet as a service? lol)
- Soft wallets have been hacked and are risky, but I think the success rate here is pretty high. A large percent of crypto users use soft wallets like Brave's Wallet and MetaMask, the vast majority of these are fine AFAIK. Not exactly safe IMO, but considering the amount of people who use them and haven't been hacked, this is certainly not an obvious "failure"
Also, unrelated to crypto, but reducing people who disagree with you to "kool-aid drinkers" and "accidentally correct people" is a negative life choice IMO
* I think you are capable of not thinking in absolutes, I just wanted to be mean on the internet
While I disagree with your post, that last frank comment made me smile.
Also, taking philosophy from Hollywood movies is a bad idea. That's entertainment, not ethics, philosophy, or morals. Its overall very shallow in terms of thinking. And I don't think anyone ever thought Star Wars Episode 3 was a thoughtful deep movie.
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The philosophical discussion of moral relativity vs moral absolutism is hundreds of years old IIRC. Plenty of ethical people believe in absolutes. Plenty of other ethical people prefer moral relativism. I don't think we'd settle the discussion here in any case.
Bypassing the absolute vs relativism discussion for a second, it has become abundantly clear that major cryptocoin groups, from Mt. Gox, to FTX, to Voyager, to Celsius, to Binance and more... have stolen funds from their users and otherwise mismanaged money.
And not in a "kinda-similar way to banks". I mean completely, and utterly lied about their operations entirely, to a way unfathomable to mainstream finance groups (be it a bank, shareholder, bondholder or more).
The cryptocoin world needs to learn how to establish trust in its system. The primary currency of banks isn't money, but trust. (Mostly: trust that your money will come back). Cryptocoiners have failed time-and-time again.
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If we think in terms of absolutism, I think we can say that lying and stealing from others is universally wrong. As FTX did to its customers.
If we discuss moral relativism, cryptocoins are *relatively* more stealing / less reliable / more cheating than their competitors at Paypal, Visa, Mastercard, and other such financial institutions. SIVB and FRC got all their money back, but we all know someone who lost money at Mt. Gox, Celsius, Voyager, or FTX, right?
So its a lose-lose regardless of your personal stance on the matter.
(You need >500 karma--I only have 200 as of writing this)
(I'm just kidding btw, and my last message is missing the /s too)
There are a lot of people who are optimistic about the technology who also welcome regulation on the CEX side. I feel like most people in the pro-crypto camp also acknowledge that several of the ancillary components that make up the crypto ecosystem (such as wallet technology) are really problematic from a UX standpoint -- but also that they are fixable.
That said, the whole global-reserve currency thing might be les of a straw man, as it correctly describes the views of a lot of Bitcoin maxis (who are delusional IMO). But we're talking about a broad technology with other use cases, and isn't accurate for everyone.
Yet after 14 years they don't seem to ever actually get fixed - from just this week[0].
The fundamentals of crypto - irreversible, be your own bank, no margin of error, medieval castle level security practices/requirements, etc go against fundamental human nature. We forget things. We make mistakes. We're not capable of securing financial resources against an entire internet full of marauding bandits.
How many CC charges are disputed daily? How many password resets do you think Bank of America does daily? Answer is: staggering numbers. Post-FTX many "crypto users" (read: have an account on a CEX) actually interacted with blockchain for the first time and transferred crypto to a wallet. Ledger wallet sales exploded. It didn't take long for them to deal with such tremendous incoming of people losing access, forgetting seeds, etc to implement a backup mechanism. It didn't go well[1].
[0] - https://www.bleepingcomputer.com/news/security/atomic-wallet...
[1] - https://decrypt.co/140317/ledger-crypto-wallet-under-fire-ov...
14 years is a very long time. I've been using Linux on the desktop since 1997. For probably 10 years there people were talking about it being "the year of the Linux desktop". 25 years later the Linux desktop has roughly 3% market share - it was extremely fringe in 1997 but it's still very fringe now.
No reasonable person thinks it will ever materialize (let's call that cracking double digits) at this point. If it weren't for the pumpers, shills, bag holders, etc driven by greed (often desperation) and direct financial incentive the unsuitability of crypto for the general population would be as widely and universally agreed upon by now.
The crypto ecosystem has also had the benefit of equating to "get rich quick" for many people along with investors, ICOs, etc pouring at least tens of billions of dollars into the ecosystem. Yet one look at a block explorer for any chain tells you very quickly that usage is abysmal.
If you look at the resources poured into the space and real on chain transaction data crypto likely has the highest user acquisition cost of all time.
I don't think it will ever die but if anything resembling widespread adoption hasn't happened by now it almost certainly isn't ever going to and this was my point: it's impossible to reach widespread adoption when the fundamental properties go against the most well established truths of humanity, society, and culture.
I don't think we'll see widespread adoption of crypto this generation. It may be very important by the time my kids are retired, though. There are going to be many, many speculative bubbles and panics in the meantime. It took 200 years to go from the British East India Company to the London Stock Exchange, but there were 3 financial panics (Kipper Und Wipper, Tulip Mania, and the General Crisis of 1640) in just the 22 years between 1618 and 1640.
For the entirety of the life of the cryptocurrency space we've had:
- The internet
- Smartphones
- Social media
- On, and on, and on...
Needless to say adoption rates for EVERYTHING (including finance) have accelerated by many orders of magnitude. I was around for the (brief) five year period on the web from 1993-1998 when people thought you were out of your mind doing any financial transactions on the internet. By 1998 grandmothers were listing knick-knacks on eBay.
If you want a more direct (recent and somewhat relevant) comparison from the world of finance look at credit cards. American Express launched the first "charge card" in 1958. The magnetic strip wasn't patented until 1960. But by 1970 51% of US families had at least one[0].
Credit card adoption rates within their first 12 years were also one-two orders of magnitude greater than crypto (after 14 years). In the 1960s!
People, broadly, take to things pretty quickly and easily as long as they actually have value, utility, and offer some improvement in their lives.
I really wish the crypto community could stop arguing, stop pumping, stop making excuses, study the (ample) data, and look inward to figure out why almost no one sees any value or utility in it. The first step to addressing an issue is acknowledging you have one.
[0] - https://www.federalreserve.gov/pubs/bulletin/2000/0900lead.p...
Crypto is fundamentally a technology that allows trade and collaboration between people who mutually distrust each other. If you trust the other person to settle up, just use a database or a credit card (it's right there in the word "credit"). It follows that early adoption is going to happen in areas where people mutually distrust each other and can't rely on traditional methods of dispute arbitration (i.e. the state and the legal system), either because they're doing something the state doesn't approve of, or the state is not viable where they are.
Most of HN does not fit into this demographic. We're usually in high-trust social groups (eg. white-collar work) in a high-trust nation (eg. the United States). So it'd be completely mysterious what use-case crypto would ever serve.
But the trend worldwide since 2009 has been generally lower levels of trust and weaker, more insecure, and more heavy-handed state institutions. In 50 years we may all look like Venezuela. A lot of people think "I'd rather be dead than live in a world where people don't trust each other", and they will probably get their wish. But for survivors, it's very useful to have a way to trade with people who probably don't have your best interests at heart.
Come to think of it, cryptocurrency is a fundamentally pessimistic technology, and perhaps the reason it inspires so much vitriol is that people don't like to think about negative things like the collapse of society happening.
Yet the web exploded in use and changed almost every aspect of society inside of a decade - connecting strangers around the world with no inherent trust mechanism. Look at my "grandma on eBay" for example. I remember the days of "Well, I'm going to send this person a money order. I hope I get my stuff". Or "ok, I'm putting my credit card number in this random webpage, let's see what happens..."
Lack of trust is not a new thing and for successful platforms and changes it hasn't slowed down adoption much.
I understand the rest of your position even less. In the event of the complete collapse of society your bitcoin (on the internet that no longer functions, depending on electricity that doesn't exist) is even less useful than paper money with a dead president on it. At least you can burn that for warmth, cooking, etc... When faced with using scare electricity for survival or mining to run the bitcoin network I assure you no one is going to waste extremely precious watts on that.
Speaking of situations no one wants to think about, in this scenario the only thing that will win and ensure survival is force - weapons. This is an area where the "preppers" hoarding ammunition are somehow more rational and logical than the crypto community - and that's really saying something.
If you are even entertaining such a scenario a couple of thousands of dollars for guns and ammunition is an infinitely better investment than crypto.
Displacement is actually at an all time high.
(Some) crypto is a deflationary store. There are not many deflationary stores, and the ones that exist (like precious metals) either require a lot of effort to store and secure, or you hold a claim on some precious metal somewhere and not the thing itself. Lots of people want a deflationary store, especially in a time when inflation looks like a fact of life!
Crypto has no inherent value, unlike precious metals. It can (and depending on the crypto, often does) go to zero. That is a risk of the currency. However, if I were to buy a claim on precious metals, I would still have the risk of going to zero (maybe if things really go sideways, no one wants to honor my claim to the metals?)
Crypto will not be useful as a currency for everyday transactions, it is useful only as a thing to hold and store, or useful as a part of black-market transactions. I don't want to make any black-market transactions, but I do want something deflationary to hold and store.
So the target market for crypto you're missing are people:
* Who want a deflationary asset
* Who are comfortable with the idea that the actual trading activity attracts a lot of criminals, but don't intend to do anything criminal themselves
* Who view the risk of a Bitcoin or Ethereum going to zero about the same as their contacts for gold going to zero in a true financial crisis
One extreme: At some point far in the future, perhaps dollars aren't a thing anymore - the last people holding dollars are the greater fool. (Note I still hold dollars and ETFs and conventionally safe investments, that's not a knock on the dollar.) But over a long enough timespan, there's a greater fool. There are just a lot of people along the way who got a lot of value out of dollars.
Another extreme: There are things like beanie babies where there is a very short amount of time to find a buyer, and the last one to buy the beanie baby before the fad stops is the greater fool. This is over a much shorter timescale, and there are only a few people who get a lot of value out of beanie babies.
Crypto is somewhere in between. I think the black market use case means crypto is closer to the dollar side of the spectrum than the beanie baby side of the spectrum. I think there's a decent chance there is always a greater fool in decades, well long enough for me to get out while I've gotten value out of it.
I'm curious how true is that in practice? I get that there can only be so many Bitcoins (for example), but if there can be infinitely many different coins AND no consensus on what THE coin is, then how protected is the value actually?
I don't read any comments here from anyone who uses it as a currency, and yet I personally do. For me it works really well. I don't buy coffee with it, I swap it for cash for that purpose, but I've paid most larger bills with it for more than 2 years. I had a good initial experience being paid with it years ago.
I find it extremely convenient. I prefer it very much now. It is currently my preferred method of accepting payment. I guess I'll just keep using it until it all collapses or whatever.
Do you have examples?
Have you paid rent, your mortgage, your car, for a laptop, etc, with cryptocurrency?
Of course they don't, if they live in a vaguely developed nation. I can't speak to the stories some tell of using it countries where the national currency is unstable, and my apologies to previous commenter if this is legitimately a problem the have, but everywhere else this is easy enough to answer.
In somewhere such as the US or Europe, who in their right mind as a landlord or mortgage provider is going to take the volatility risk of accepting crypto as a primary means of settling rent/home payments, when well in excess of 99 percent of customers wouldn't use it anyway? The very few businesses that do accept often do so as a novelty - see the use of dogecoin on some fan stores etc etc.
As always, I'm sure there are exceptions that prove the rule, but I can tell you right now my mortgage provider, car dealer and computer vendor would all laugh at me if I even asked.
I pay as much as possible with cash as in paper bank notes, but those are also almost entirely crypto funded.
I do not use regular CEX (centralized exchanges) at all as on or off ramps or submit to any KYC for any of this.. that said I'm definitely wouldn't be able to remain anonymous if I were to do anything grossly illegal with my funds.
Do you pay all these things with crypto or do you (or a service) convert it to fiat and then pay your bills?
I don't live where my username implies, in case you're wondering.
The stablecoin is not in the local currency of course, but it's not different in any practical way from handling foreign USD payments.
You're not using it as currency.
However, the underlying technology is legitimately interesting and solves a lot of hard problems (e.g. distributed systems, consensus, clock synchronisation across wide networks, provable ownership of assets, etc, etc).
I don't see any value in the coins blockchains operate on except maybe as a means for paying for execution on that network.
I do see a tonne of value in say, abstracting something like USDC payments/remittance/etc that runs very cheaply/quickly on (for example) Solana and remove middle men from these equations.
I think the market/world will optimize out of the un-interesting parts over time and the use cases that add value to the world will rise to the top.
I joined crypto because I felt that the existing economy was working against me so you bet I noticed the sudden shift when the crypto economy also started working against me.
This sounds very much like what FTX was accused of doing.
- Publius Vergilius MaroSource: https://twitter.com/JohnReedStark/status/1665748594421297152
Is there any player in this space that plays by the rules? CZ going the way of SBF. Tether next?
Nice.
Now that the feds seem to be giving a hoot about these scams, they shouldn't have much trouble flipping people and rolling up the chains to the bosses on the other exchanges too.
I do not expect CZ could get anywhere near his reported $15 billion. I do not think he could get and keep more than one billion.
SBF didn’t that’s for sure.
And he’ll be in jail to boot.
This is yet another example of the crypto boom going bust, which has been a series of unregulated and utterly opaque exchanges collapsing. Over and over again, the entire ecosystem has been snake oil salesmen, who are selling snake oil to other snake oil salesmen.
And the crypto purists will cry “oh, but Bitcoin, it would work if we all held dear to the purity of the concept and kept our relevant info in lockboxes in our panic rooms!” And the cynical, but also correct, among us will mutter “well that’s cool, but no normal human is going to do that, and the valuation of whole thing is based on mass uptake, and that’s contingent on having middlemen do a lot of the ugly gruntwork, because otherwise it’s far too difficult for normal users to ever bother with.” And those middlemen are, again, invariably, snake oil salemen who will cut and run.
It seems the issue with Binance was that it was running afoul of regulations. In what way is that "unregulated"?
“Blatant disregard of the federal securities laws and the investor and market protections these laws provide” means acting unregulated, even if one is properly subject to regulation [1].
[1] https://www.sec.gov/files/litigation/complaints/2023/comp-pr...
In what world do you think that "Bitcoin working" implies all centralized bad actors are washed out? All middleman are toast? This stuff takes time, and the existence of middlemen doesn't negate the premise that blocks keep being mined without censorship.
Your second is a strawman, the "entire global economy" need not moved to crypto for it to be useful.
The entire rest of your post is a stack of shallow, dismissive tropes that contribute nothing to the discussion.
Does your utility company take crypto? Mine certainly doesn't. Therefore, in order for me to use crypto as a currency, I need to be able to convert it to fiat. Point out where exactly this is incorrect, or in what way crypto can address it without making some dreamy assumption that the world shifts to using crypto as the global currency (which will simply never happen). Did I say nobody accepted crypto? Nope, never said that.
I beg to differ. There's a reason actually paying with Bitcoin/ETH/crypto somewhere (anywhere) is celebrated on crypto twitter, /r/bitcoin, etc.
After 14 years it's still a novel and rare enough experience people feel the need to record videos of it and post them online to celebrate "adoption".
Imagine sending a tweet in 2020 (14 years after founding of Twitter) being noteworthy. Ridiculous, right? That's what crypto looks like to those of us not trapped in the bubble/echo chamber.
On that note, I once again point to crypto twitter, /r/bitcoin, etc where you see "what's your retirement plan with crypto?" posts constantly.
Source?
This is exceedingly poor-quality evidence for your claim.
There are literally no services I use or products I buy that take bitcoin.
From weekly groceries to my car insurance or, well, anything... none take bitcoin. The overlap between businesses that accept bitcoin and the things 99.9999% of people need to live their lives on a daily basis would not be distinguishable to the human eye on a venn diagram.
I don't think that is a useful definition of utility.
Does gold not work if the exchange it's traded on is fraudulent? No, it can still be held and traded peer to peer, and it can still be used in manufacturing.
You're conflating the market with the actual network. The Bitcoin network works just fine.
They have long offered low trading fees, while heavily inflating on-chain withdrawal fees and duping users into accepting "wrapped bitcoin" instead (that is, a layer of misdirection and nonetheless custodial bitcoin, held by Binance or some other third party).
If what the SEC allege is proven, that they moved customer coins to a separate legal entity, I don't think it's a leap to assume the coins users think they're buying perhaps don't even exist - that the exchange have been selling paper coins banking on that users won't withdraw en masse.
This is what FTX were doing too - selling paper bitcoin; bitcoin that was not backed 1-to-1 (or anywhere close, they actually held a relatively small number), instead funneling customer money into the hundreds of other coins FTX had invested in.
This could reveal the apparent mass susceptibility for VC backed "cryptos" - that the masses are not so dumb after all, or at least not in the way you thought, that instead they've been fleeced.
Bitcoin may still suffer reputational damage in the short term, but surely the elimination of such schemes is, to use an overused phrase that seems very apt now, good for bitcoin?
If you can exchange crypto for goods and services then works. period; no need to move any goal posts.
Many fiat currencies pass the "exchange for goods and services" test you propose. Many crypto coins would fail them, depending on how broadly we want acceptance to be.
This category of claim baffles me. Is the hypothesis there weren't wars or recessions when the world was on the gold standard?
What risk is being alleged? That people could trade things they wanted at a price they agreed to?
Have we already forgotten FTX?
People getting scammed by inappropriate marketing of unregulated securities is a secondary risk.
People losing money due to market abuse is a tertiary risk.
Also, its a bad practice for, well, a lot of reasons. You assume that all balances are positive, and that they haven't used that account for auditing purposes, or to commit some plain old investor fraud by claiming to have more cash than they do. What happens if the balances aren't recorded accurately?
There's a million reasons that commingling funds is incredibly bad practice.
Secondly it’s often a violation of the asset management contract terms (see the section on “Illegal commingling” here https://www.investopedia.com/terms/c/commingling.asp