Is Sam Bankman-Fried the Devil?

Sam Bankman-Fried (SBF), a crypto billionaire and founder and CEO of the popular FTX crypto exchange, recently made headlines. 


Crypto billionaire Sam Bankman-Fried

This was due to him posting a document described as “a set of standards that we as an industry could enact to create clarity and protect customers while waiting for full federal regulatory regimes.”
Or more simply: “Possible Digital Asset Industry Standards.”
It’s important to note that this post was “just a draft” and open to feedback and criticism. 
And it certainly received plenty.

Popular crypto personality and YouTuber Bitboy Crypto released a video depicting SBF as the Devil. He even went on an Alex Jones-style rant berating him as one of the elites vs. “the people.” 


Crypto YouTuber BitBoy says Coinbase at FTX CEO's are ruining crypto for everyone.

It seems Bitboy really hates suits, people in suits, and particularly people who wear glasses. I wear glasses and occasionally a suit, and consider myself very much not an “elite.” But I will do my best to suppress any offense I may feel. 
FTX is a custodial financial intermediary that holds billions of dollars of funds from customers not to mention their personal information. Many government agencies regulate these intermediaries through the Bank Secrecy Act (BSA).
This law essentially forces exchanges to give up their customer’s personal data to any number of government entities, which we all know are not the best safekeepers. Of course, government bureaucrats see nothing wrong with this but justifiably many free-thinking people do.
In an attempt to get ahead of an increasingly hostile regulatory environment, SBF made a number of proposals:

a)    We need regulatory oversight and customer protection.
b)    We need to ensure an open, free economy, where peer to peer transfers, code, validators, etc. are presumptively free.
c)     We should establish regulation—and until then standards—to ensure (a/b)

Many in crypto would argue about needing regulatory oversight but we have to admit that it’s inevitable. Some degree of consumer protection is reasonable. And a free economy is literally why crypto exists. We should do everything we can to ensure that continues.
Where SBF really got into trouble was his advocacy of blacklists, saying:

First, it means that we have blocklists and not allowlists for illicit financial activity.

We need fast, reliable lists of addresses associated with illicit finance.

But peer to peer transfers should generally be free as long as they’re not going to sanctioned actors.

Blacklists exist to prevent the transfer of illicit funds. For instance, if a crypto exchange gets hacked, blockchain forensics can be performed that will determine not only the recipient's address but various ancillary addresses as well. This has been done many times on a voluntary basis.
The danger lies in legal rules that seek to prohibit transactions on the entire blockchain. This is what all of the conspiracy theorists with their talk of CBDCs and Great Resets are afraid of – total surveillance and control.
Of course, SBF suggests these blacklists be accessible by everyone and updated in real time.
That’s fine as long as no laws are created that compel blockchains to enforce these blacklists. 
It must be voluntary. 
No writers of code should be subjected to fines or imprisonment because they failed to implement a government-mandated blacklist. That is tyranny in my mind. Code is protected in America by the 1stAmendment, and it should remain so. 
The subject gets particularly murky when the Office of Foreign Assets Control gets involved (OFAC). We recently witnessed their ham-fisted approach with the Tornado Cash sanction. And they would no doubt continue to damage the crypto industry if given the opportunity. 
OFAC has sanctions on entire countries including Iran, Russia, Syria, and Cuba. Is it the goal of decentralized finance to see innocent citizens of these countries unable to transact with Americans? 
Definitely not. It’s unjust and unethical. And the concept goes against the very principles on which the crypto industry was founded.
The other area where he runs afoul is his suggestion that all DeFi protocols would require Know Your Customer (KYC) authentication:

1.     You don’t need a financial license to upload code to the blockchain (so long as it’s not otherwise illegal/nefarious)
2.     Similarly, validators have a core duty to correctly validate blocks — not to judge or police them
3.     However, the following activities would potentially require some license/registration/etc.:
    a.     Hosting a website on e.g. AWS hat provides a US retail front-end for decentralized protocols
    b.     Marketing DeFi products to US retail investors.

This would mean that KYC authentication would be required to use decentralized exchanges like, potentially prohibiting the citizens of all the aforementioned countries from accessing various functions on Ethereum et al. 
It also could require non-custodial crypto wallets to spy on their users and report activities to various government agencies.
Currently, major exchanges have to abide by all of these rules. But forcing every DeFi front-end to comply would simply force most into extinction. This essentially leaves only the big, well-funded companies left. And it’s why many are criticizing SBF and see these proposals as an attempt to kick the ladder out for everyone who comes after him. 

After all, he’s made billions of dollars in this space capitalizing on its unregulated and decentralized nature. It seems all-to-convenient that he now wants to impose these rules. 
Hopefully, SBF sees the mistakes in his reasoning and is inspired to modify his proposals. And with legislation looming, I also hope that major crypto intermediaries can guide policymakers in the right direction. Some crypto regulations are necessary, and it’s important that they get this right. 
In a world that is moving increasingly towards autocracy, it’s more important than ever to safeguard one of the last remaining areas of decentralization. 

America, more than anyone else, should lead the way in empowering this technology rather than enforcing more central control and surveillance. 
I’ll be keeping a close eye on Sam Bankman-Fried, as I always have. 

Keeping an eye on Sam Bankman-Fried

One cannot ignore him as he is one of, if not the most, influential figure in the crypto space. And he’s become a top political donor, giving $40 million to political action committees and campaigns this year in the runup to midterm elections

His actions have been both self-serving and altruistic to the outside observer.

Let us hope that he has the best intentions for us “the people.”


Chris Curl

Chris Curl
Editor, Daily Profit Cycle