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---
title: Unregulated crypto markets are desirable because of the opportunity for gain
description: Evaluating the thesis that there is money to be made in unregulated crypto markets, and therefore unregulated crypto markets are desirable. We find the negative externalities of an unregulated crypto market to outweigh the benefits, thus this claim fails: an unregulated crypto market is *not* desirable.
category:
- claim: y
- featured: y
- interview: n
- deepdive: n
claim:
- evaluation: NN
- confidence: HH
---
# Summary
## Claim Steel-Manned
#### Retail traders (individual, non-professional market participants)
* Investing in crypto has the possibility of gaining me huge assymetric returns.
* I've heard other people making huge gains by investing in crypto, therefore it is possible that I can make huge gains aswell.
#### Quants and hedge funds
* If I'm allowed to trade products that are massively [asymmetric](../concepts/asymmetric-information.md) and disadvantageous to retail traders, then I can and I will. Markets are a force akin to evolution: inefficient players will be elimated, and the strongest will be rewarded.
* There is no non-public disclosure about the risks of these assets. Everyone is going in with their eyes open that this is the wild west.
* Even if I know it’s a [greater fool asset](../concepts/greater-fool-theory) and has no [fundamental value](/concepts/fundamental-value.md), if I have access to non-public information and more capital I can (and should) use it and exit before the other fools.
* If the market allows [market manipulation](../concepts/market-manipulation.md) ([pump and dumps](../concepts/pump-and-dump.md), insider trading, [wash trading](../concepts/wash-trading.md)) this is public knowledge and it is reflected in the price formation of the assets.
* Some people legitimately did make money trading on [bubbles](../concepts/bubble.md): South Sea Bubble, Dotcom Bubble, Tulip Mania. These booms and busts are just a natural part of market cycles.
## Evidence of claim being made
Retail trader interviewd by the FT in [Barrett, Claer. ‘Why Young Investors Bet the Farm on Cryptocurrencies’. Financial Times, 2021:](https:www.ft.com/content/162839aa-0437-478b-a4d4-4a8d7ab71458)
> Sam found out his younger brother had turned a £3,000 investment into £30,000 within four years — money he now intends to use as a property deposit. "I was very surprised and it made me feel a bit stupid . . . why aren’t I doing this?... I'll either be rich or wrong".
Mann Group chief in [Silverman, Gary. ‘Crypto Has “No Inherent Worth” but Is Good to Trade, Says Man Group Chief’. Financial Times, 2021:](https://www.ft.com/content/9275baf4-0422-43a1-b8c9-9317882ca874)
> If you look at cryptocurrencies as a whole, it is a pure trading instrument. There is no inherent worth in it whatsoever. It is a tulip bulb.
[Huang, Matt. ‘Bitcoin for the Open-Minded Skeptic’. Matt Huang, May 2020:](https://www.matthuang.com/posts/bitcoin_for_the_open_minded_skeptic.)
> Bitcoin offers a compelling risk/reward profile for patient, long-term investors willing to spend the time to truly understand Bitcoin.
[HQ, Ikigai. ‘The Case for a Small Allocation to Bitcoin’. Kana and Katana, 1 March 2019:](https://www.kanaandkatana.com/valuation-depot-contents/2019/4/11/the-case-for-a-small-allocation-to-bitcoin)
> Bitcoin offers a unique opportunity for a non-material exposure to produce a material outcome. It would be irresponsible to have an exposure to Bitcoin that one cannot afford to lose because the risk of losing the principal is very real. But it would be almost as irresponsible to not have any exposure at all.
## Evaluation: False (High confidence)
#### Risk to individuals
While some people have made gains trading crypto, there is a strong sample bias in self-reported winnings of crypto assets: participants who make outsized returns [gambling](../claims/is-gambling.md) on the [bubble](../concepts/bubble.md) are more likely to report these returns compared to the vast majority of those who lose money investing in crypto assets.
And in such an [asymetric](../concepts/asymmetric-information.md) and "wild west" market, the chances of a minow beating out the sharks is tiny.
Everything that has been illegal for 80 years is suddenly allowed: [wash trading](../concepts/wash-trading.md); [front running](../concepts/front-running.md); [insider trading](../concepts/asymmetric-information.md); price manipulation and [order book](../concepts/order-book.md) tampering;[refusing cash withdrawels](../concepts/counterparty-risk.md); [pump and dumps](../concepts/pump-and-dump). Exchanges are basically like bucket shops from the 1920s.
What we are seeing is a captive market for fictitious commodities that is controlled by opaque unregulated market making and an economic cartel. This is great if you're inside the cartel, but not so great if you aren’t. Wealth transfer from the public to insiders is all but guaranteed by the [information asymmetry](../concepts/asymmetric-information).
#### Wider risk
We have no idea how much [leverage](../concepts/leverage.md) is baked into the entire market, induced by products like unbaked [stablecoins](../concepts/stablecoin.md) which can seemingly produce limitless amounts of unsecured debt products on demand.
In her 2022 paper ‘DeFi: Shadow Banking 2.0?’ Prof. Hilary Allen warns that the current [decentralized finance](../concepts/defi.md) system risks emulating the “shadow banking” services (functional equivalents for banking products which operate outside the regulated banking sphere) which contributed to the 2008 banking crisis:
“if DeFi is permitted to develop without any regulatory intervention, it will magnify the tendencies towards heightened leverage, rigidity, and runs that characterized Shadow Banking 1.0.”
Commentators have raised concerns about stablecoins in particular, describing them as analogous to the money market funds (MMF) at the heart of the 2008 crisis in their potential to cause runs. Prof. Allen explains:
“If something were to shake confidence in stablecoins’ acceptance in the DeFi ecosystem (this ‘something’ could range from a hack, to a problem with the reserve of assets backing a stablecoin, to a problem with the smart contracts managing the value of a decentralized stablecoin), we could then expect holders to exchange their stablecoins for fiat currency and exchanges to seek redemption, forcing stablecoin issuers to start liquidating the reserve of assets backing the stablecoin, depressing the market value of those assets, and cutting off credit for the corporations in which MMFs usually invest through the commercial paper market.”
This fragility and extreme vulnerability pervades the entire crypto-economy. The core mechanism – of minting tokens with no use value and who’s market price is artificially driven by speculative hype – underpins almost the whole system. What might appear as a recipe for [perpetual growth](../notes/financial-perpetual-motion-machine.md) and financial gain in fact appears highly likely to have created a speculation fuelled [bubble](../concepts/bubble.md).
Where does all this lead to?
* If the crypto marklet is left unregulated, [systemic risk](..claims/is-systemic-risk.md)
* Inequality (money flows to the sharks)
* Distrust and cynicism in
* society: I’m out for myself, other people are just out for themselves. Dishonesty and exploitation are a normal part of (capitalist) society.
* markets: assuming that markets have some value then undermining faith in them is problematic.
* the state and its institutions:When it goes wrong the state and its institutions and leaders are blamed, further corroding trust in our collective capabilities.
* [Moral hazard](../concepts/moral-hazard.md) - public is incentivized to take on disproportionate risk expecting a bailout.
* A terribly pathological form of [capitalism](../concepts/capitalism.md) that doesn't result in price formation on collective enterprise, goods or services.
## References
Akerlof, G.A. (1978) ‘The market for “lemons”: Quality uncertainty and the market mechanism’, in _Uncertainty in economics_. Elsevier, pp. 235–251.
Allen, H.J. (2022) ‘DeFi: Shadow Banking 2.0?’, _SSRN Electronic Journal_ [Preprint]. Available at: [https://doi.org/10.2139/ssrn.4038788](https://doi.org/10.2139/ssrn.4038788).
Burilov, V. (2019) ‘Regulation of Crypto Tokens and Initial Coin Offerings in the EU: De lege lata and de lege ferenda’, _European Journal of Comparative Law and Governance_, 6(2), pp. 146–186. Available at: [https://doi.org/10.1163/22134514-00602003](https://doi.org/10.1163/22134514-00602003).
Cumming, D.J., Johan, S. and Pant, A. (2019) ‘Regulation of the Crypto-Economy: Managing Risks, Challenges, and Regulatory Uncertainty’, _Journal of Risk and Financial Management_, 12(3), p. 126. Available at: [https://doi.org/10.3390/jrfm12030126](https://doi.org/10.3390/jrfm12030126).
Dhawan, A. and Putnins, T.J. (2020) ‘A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets’, _SSRN Electronic Journal_ [Preprint]. Available at: [https://doi.org/10.2139/ssrn.3670714](https://doi.org/10.2139/ssrn.3670714).
Ferrari, V. (2020) ‘The regulation of crypto-assets in the EU – investment and payment tokens under the radar’, _Maastricht Journal of European and Comparative Law_, 27(3), pp. 325–342. Available at: [https://doi.org/10.1177/1023263X20911538](https://doi.org/10.1177/1023263X20911538).
HQ, I. (2019) _The case for a small allocation to Bitcoin_, _Kana and Katana_. Available at: [https://www.kanaandkatana.com/valuation-depot-contents/2019/4/11/the-case-for-a-small-allocation-to-bitcoin](https://www.kanaandkatana.com/valuation-depot-contents/2019/4/11/the-case-for-a-small-allocation-to-bitcoin) (Accessed: 14 September 2022).
Huang, M. (2020) _Bitcoin for the Open-Minded Skeptic_, _Matt Huang_. Available at: [https://www.matthuang.com/posts/bitcoin_for_the_open_minded_skeptic](https://www.matthuang.com/posts/bitcoin_for_the_open_minded_skeptic) (Accessed: 14 September 2022).
Lefevre, E. (2004) _Reminiscences of a stock operator_. John Wiley & Sons.

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# Editing Guide
This is a guide to help people contribute content or manage contribution of content. Focus is on the "wiki" content stored in markdown -- which is all pages except the front page and a few special generated pages e.g. `/all` page.
This is a guide to help people contribute content or manage contribution of content. Focus is on the "wiki" content stored in markdown -- which is all pages except the front page and a few special generated pages e.g.
## Introduction
The [Making Sense of Crypto and Web3](https://web3.lifeitself.us/) website is a wiki site: a collaborative site where users can add or otherwise edit content. This guide is for users who wish to add or edit content on the site, such as key concepts or ideologies in the [Guide](https://web3.lifeitself.us/guide) section or sensemaking in the [Claims](https://web3.lifeitself.us/claims) section.
### How does the site work?
All the content for the [Making Sense of Crypto & Web3 website](https://web3.lifeitself.us/) is contained within the life-itself/web3 [Github repo](https://github.com/life-itself/web3).
You will find the wiki content mostly in the folders ‘claims’ and ‘concepts’.
#### Technical Architecture
The website is written in Markdown. A tool called content layer converts the Markdown files into HTML (the standard computer language for displaying and formatting web pages) so that they are displayed as pages on the site. This is the case for all pages on the website except for the homepage which is written directly in HTML.
#### Markdown
Markdown is a markup language (computer language for displaying and formatting web pages), which is designed to be easy to write and easy to read. It’s widely deployed on the web, for example by DataHub, GitHub, Stackoverflow and many other sites.
In Markdown, you control the display of the document. For instance, you can format words as bold or italic, add images, create lists, and much more. Mostly, Markdown is just regular text with a few non-alphabetic characters thrown in, like ## or **.
Head over to our [Markdown Guide](https://playbook.datopian.com/markdown/#why-markdown) to learn more about Markdown and how to use it.
#### Front Matter
In the world of computer programming, front matter is metadata (data about data) at the top of a file. Front matter does two things: a) it displays key info about a page (such as its title and description) in a structured way which helps with a consistent layout throughout the site and b) is used as metadata for SEO (search engine optimization) purposes, helping our content to reach interested readers.
##### Using front matter
Front matter should always be at the very top of the Markdown file, marked out by three dashes (---) above and below.
Our front matter template can be found at the top of this [template document](https://github.com/life-itself/web3/blob/main/templates/template.md).
You can copy and paste this into the Markdown file you are editing and fill in the appropriate fields. Note: All fields above are optional. Remove (or leave empty) the fields that are not in use to eliminate any errors during build. It is preferable to have at least a title and a description in the front matter for every page.
Remember to include the three dashes above and below and to paste at the very top of the file.
#### Episode notes/deep dive pages
Note that the template for episode notes/deep dive pages which accompany video conversations is [here](https://github.com/life-itself/web3/blob/main/templates/template.md).
## How to edit the website
There are two methods for making edits to the website:
1. Edit directly in Github
2. Edit on your local machine (using a code editor or Obsidian)
The first method is the most simple method. The second is more technical.
If you run into any issues while following this guide, please [let us know](https://lifeitself.us/contact/) so we can improve this guide to help future contributors.
### Video tutorial
Some of the steps in the instructions below are also demonstrated in this [video tutorial](https://drive.google.com/file/d/1mWqXDx6ICJ_1qreoYoB774weWi-AtyDo/view). References to the video tutorial are given as timestamps in brackets.
### Method 1: Edit directly in Github
#### Setup
* Create a [GitHub](https://github.com/) account if you don’t already have one
#### Key steps
* Go to the repo storing the website content: [https://github.com/life-itself/web3](https://github.com/life-itself/web3)
* Look for the file that corresponds with the page you want to edit. To find the file, it might help to look at the page URL. E.g. To find the file containing the “Blockchain” page ([https://web3.lifeitself.us/concepts/blockchain](https://web3.lifeitself.us/concepts/blockchain)), go to the folder “concepts“, then the file “blockchain.md”.
* Click on the pencil icon in the upper right corner to edit this file
* Make your edits
* Once you’ve made your edits, go to the bottom of the page where you will see a box titled ‘Propose changes’. Type into the first text box below ‘Propose changes’ a brief description of the edits you have made. E.g. ‘fix typo’, ‘add citation’ or ‘expand definition’. Use the box below that for optional further description of your edits.
* Then click the button that says ‘Propose changes’.
* Once you’ve clicked the ‘Propose changes’ button you will be taken to a new page. Here, click the button that says ‘Create pull request’. This will notify a team member to review and confirm the edits you’ve made.
* Once they’ve done that, your edit will appear on the site! Thanks for contributing!
### Method 2: Edit on your local machine (using a code editor or Obsidian)
Method 2 is more technical and involves a_ fork -> clone -> branch -> edit -> pull request_ workflow which is standard for contributing to open source GitHub projects.
In the _edit_ stage of the workflow – where you edit the Markdown file corresponding to the page you wish to edit – you can choose to use a code editor, such as Visual Studio Code (one of the most popular code editors), or Obsidian. For some people, Obsidian is a more familiar, more comfortable way to edit files. It also lets you preview what your edits will look like (13:05-15:26). For Obsidian, take a look at the [video tutorial](https://drive.google.com/file/d/1mWqXDx6ICJ_1qreoYoB774weWi-AtyDo/view) starting from 09:45.
#### Setup
* Create a [GitHub](https://github.com/) account if you don’t already have one
* Download [VS Code](https://code.visualstudio.com/) or [Obsidian](https://obsidian.md/). You can use whichever one you prefer. This is what you’ll use to view and edit the website’s Markdown files.
#### Key steps
##### Stage 1: Fork
In this stage, you ‘fork’ the Life Itself Web3 repository, i.e. you make a remote copy of the repository in your own GitHub account. If you’ve forked the repo before, skip this stage.
* Go to the repo storing the website content: [https://github.com/life-itself/web3](https://github.com/life-itself/web3) (0:00-0:02)
* Click the ‘Fork’ button in the upper right-hand corner of the repo page to fork the repository
##### Stage 2: Clone
In this stage, you ‘clone’ your forked repository, i.e. you copy your forked version of the Life Itself Web3 repo to your computer so that you can make edits on your local machine without affecting the remote git repo. 00:40-01:50 of the [video tutorial](https://drive.google.com/file/d/1mWqXDx6ICJ_1qreoYoB774weWi-AtyDo/view) corresponds to this stage. _If you’ve cloned the forked repo before, skip this stage._
* Search your computer for its ‘terminal’ and open it. The terminal is simply a text-based way of interacting with the computer through commands. In the terminal, you can type commands, manipulate files, execute programs, and open documents. (00:03-00:39)
* On your forked repo page (make sure you’re not on the main repo page), click the green ‘Code’ button and copy the HTTPS link
* Type into Terminal cd < directory >, where < directory > is replaced by the path to the folder you want to navigate to. E.g. “cd Desktop/Folder/life_itself/tutorial”. On a Mac, you can drag the folder to the terminal after typing “cd”. Otherwise, you can find the folder path [Mac](https://www.howtogeek.com/721126/3-ways-to-see-the-current-folder-path-on-mac/#:~:text=Open%20a%20Finder%20window%2C%20and,path%20to%20the%20current%20folder.); [Windows](https://www.wikihow.com/Find-a-File%27s-Path-on-Windows) and type or paste it in manually.
* What you’re doing here is navigating in Terminal to the folder on your computer where you want to save the cloned repository (i.e. changing the working directory). Normally, on your computer you do this by searching for a folder and clicking on the icon to open it. In Terminal, you do this by typing commands. The command for changing directory is: cd &lt;directory>. (00:40-1:11)
* Type into Terminal the command “git clone” and then paste the repo URL you copied. E.g. “git clone https://github.com/life-itself/web3.git”. Press enter. (1:13-1:48)
* N.B. When you try this, you may be prompted to install command line developer tools to be able to run git commands, e.g. XCode for Mac. If this is the case, follow the instructions for installation.
##### Stage 3: Branch
In this stage, you create a new ‘branch’, or temporary version, of the repository on which to make edits. These edits will later be merged with the main repository branch.
* Navigate in Terminal to the Life Itself Web3 repo which has been cloned to your computer. To do this, type “cd web3” or “cd < directory >” (as in Stage 2). Press enter. (1:49-2:02)
* Update your local clone of the remote repository. _You don’t need to do this if you’ve only just cloned the repo just now._
* Type into Terminal “git pull”. Press enter.
* Create a branch on which to make edits
* Type “git checkout -b < your_branch_name >”. E.g. you might name your branch “edits”. So you would type “git checkout -b edits”. This command will create a new branch and switch you to this branch. N.B. the branch name cannot contain spaces.
##### Stage 4: Edit
In this stage, you use either a code editor, such as VS Code (see 4a), or Obsidian (see 4b) to view and edit the website’s Markdown files.
###### 4a: VS Code
* Open VS Code
* Click the ‘Explorer’ icon at the top left hand side of the window. Then click ‘Open Folder’ to open the Life Itself Web3 repo which you cloned. You will then be able to see the list of folders from the repo on the left side of the window. (2:03-3:35)
* Find the file that corresponds with the page you want to edit.* (3:31-4:03)
* Make your edits and save
###### 4b: Obsidian
* Open Obsidian
* Open the cloned github repo folder as a vault (10:07)
* Find the file that corresponds with the page you want to edit.*
* Make your edits and save.
* See video tutorial (13:05-15:26) for info on useful Obsidian features such as shortcuts for linking to other pages.
*N.B. To find the file that corresponds with the page you want to edit, it might help to look at the page URL. E.g. To find the file containing the “Blockchain” page ([https://web3.lifeitself.us/concepts/blockchain](https://web3.lifeitself.us/concepts/blockchain)), go to the folder “concepts“, then the file “blockchain.md”.
##### Stage 5: Pull request
In this stage, you prepare the changes you have made (and saved) to a Markdown file to be published on the website.
* Go to your computer’s Terminal (4:59-5:08)
* Type “git status”. Press enter. (5:09-5:30)
* Type “git add < name of modified file >”. E.g. “git add site/content/test.md”. Press enter. (5:31-6:06) If you’ve edited more than one file, you can type “git add .” to add all the modified files with one command.
* Type “git commit -m “< description of edit >””. E.g. “git commit -m “fix typo”” or “git commit -m “add extra text to definition””. Press enter. Note that the description of the edit must be in double quotation marks. (6:07-7:01)
* Type “git push origin <your_branch_name>”, replacing <your_branch_name> with the name of the branch you create.
* Submit your changes for review: Go to your Github repo and click on the “Compare & pull request” button. Add a description and submit the pull request.
* Someone from our team will review and confirm the merge. Once they’ve done that, your edit will appear on the site! Thanks for contributing!
##### Resolving merge conflicts
On occasion, it is possible that after submitting a pull request you may get a message flagging merge conflicts. This could be because when you were making your changes, someone else might have pushed new changes to the same content you were editing. If this happens, see here for what to do to [resolve a merge conflict](https://docs.github.com/en/pull-requests/collaborating-with-pull-requests/addressing-merge-conflicts/resolving-a-merge-conflict-using-the-command-line).
# Glossary
* Repo => short for [Repository](https://docs.github.com/en/get-started/quickstart/github-glossary#repository). Contains all a project’s files.
* Working directory => The folder you are currently working in.
# Contact
If you run into any issues while following this guide, please [let us know](https://lifeitself.us/contact/) so we can improve this guide to help future contributors.
[Read the guide](https://docs.google.com/document/d/1RcwjaJYn0jtMw9rOR9W0Gv2fmQDd7Fjr53NM6j1-lco/edit?usp=sharing).

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---
title: Are Crypto Tokens Securities?
date: 2022-02-17
created: 2022-04-13
description: "In episode #3 of our ongoing deep dive into web3 and crypto, we explore the nature of financial products known as 'securities', their relation to crypto tokens, and the regulatory framework that exists around these structures."
image: /img/are-crypto-tokens -securities-thumbnail.jpg
title: Unregulated trading in securities is desirable
description: "Evaluating the thesis that unregulated trading in securities is desirable."
youtube: https://www.youtube.com/embed/z2uAg-AIs-Y
podcast: https://anchor.fm/life-itself/episodes/Are-Cryptocurrencies-Securities--The-Nature-of-Securities--Their-Relation-to-Crypto-Tokens-with-Stephen-Diehl-e1fph69
featured: true
aliases: notes/are-crypto-tokens-securities.md
category:
- claim: y
- featured: y
- interview: n
- deepdive: n
claim:
- evaluation: NN
- confidence: HH
---
* Wiki topic: [Securities Framework](../concepts/security.md)
# Summary
***
## Claim Steel-Manned
# Episode Notes
### Subclaim 1: A better, easier way to raise money for my venture
## Summary
It is very easy to create an equity crowdfunding and cap table structure on top of crypto platforms like ethereum. Individuals can do it anonymously and raise billions of dollar equivalents in seed capital for ventures that are very early. The SEC, government or lawyers do not need to get involved at all.
There is currently debate about how crypto investments fall under the existing securities regulatory framework. In this conversation, Stephen Diehl and Rufus Pollock dig into this debate, exploring what securities are and how they relate to crypto tokens.
Previously this kind of access was gated to US persons with connections and access to funds and capital. This is a liberatory and egalitarian force that democratizes company formation that lowers barriers and allows all types of common enterprises that were previously prohibited by law.
Rufus and Stephen then consider the question, should crypto tokens be subject to the same regulation as securities? They 'steel man' the position that crypto investments should not be regulated as securities, outlining 3 key claims:
1. Unregulated crypto investment is a liberatory and egalitarian force that democratizes company formation, lowers barriers, and allows all types of common enterprises that were previously prohibited by law.
2. The ability to raise capital outside of the rule of law is a human right that is a safeguard against tyranny.
3. Equity markets are ripe for disruption - it is time for the start of a new era that will reconfigure the entire global economy.
### Subclaim 2: Ability to raise capital outside of the rule of law
Rufus and Stephen end their conversation with an analysis of this position and the associated claims.
The ability to raise capital outside of the rule of law is not only a good thing, it is an outright human right that is a safeguard against tyranny eg Edward Snowden, SciHub, Wikileaks. See [Bitcoin as an Anti-Authoritarian Force][../notes/bitcoin-as-anti-authoritarian.md] for more details.
## Evidence of claim being made
...
## Evaluation
### Subclaim 1: A better, easier way to raise money for my venture
The smartphone era gives retail investors access to the public equities market with unparalleled levels of simplicity unseen in markets. There’s also a genuine interest in giving retail investors access to private equity investments. But is this desirable?
* High risk, high return. But with a 95% failure rate is it even appropriate for retail? Venture is not a great asset class compared to index funds in terms of brute returns.
* If we lower the barriers to entry, the [ICO](../concepts/ico.md) bubble is a case study in even higher failure rates. Unprecedented levels of fraud unseen in developed markets since the 1920s.
* **ICOs are like a public stock offering before the company even exists or has a product.**
* Giving seed-stage ventures billions of seed capital detached from revenue, traction, or product market fit is a recipe for disaster.
* There’s a perverse incentive to simply abscond with seed money rather than actually build anything.
* There’s a perverse incentive to build technical Potemkin villages that focus on “token value go up” without building anything. Many crypto companies are here.
* Can read the whitepapers of these companies and even people with PhDs in econ and software engineering can’t parse what they’re doing. ***How is the lay public going to do due-diligence on claims of financial perpetual motion machines?***
* Can the courts scale to handle millions of new investment fraud cases every year?
* Is extreme levels of fraud simply the price we pay for a more dynamic economy or does this all lead to ruin like it has in the past?
Is there a legal investment vehicle structure that balances the risks of retail investors with their desire for access to high-risk early ventures? Or should we simply bracket these kinds of securities sales to the already-wealthy? Because the check-size to risk ratio just empirically fits in the “Goldilocks zone” of the practical regulatory/legal/public-interest concerns.
### Subclaim 2: Ability to raise capital outside of the rule of law
From the perspective of civil society, the ability to raise capital outside the rule of law **is not desirable**.
#### Crypto facilitates tax evasion
Today there already exists an enormous [shadow banking](../concepts/shadow-bank.md) space which facilitates the creation of credit and movement of money through jurisdictions with questionable money controls and loose enforcement of policy. Many wealthy individuals avail themselves of this transnational network of trusts and shell companies to avoid paying taxes in their country of residence, opting to instead hide their money abroad in opaque financial structures set up in island nations like the Bahamas or Cayman Islands.
The incorporation of crypto into the shadow banking system, which is already happening, is providing even easier access for disreputable individuals to avoid taxes and to expand their holdings abroad. Instead of offshore shell companies, these individuals will use [stablecoins](../concepts/stablecoin.md) and [cryptoassets](../concepts/cryptoasset.md) to hide their money from tax authorities.
From the public interest perspective none of this setup is desirable, since it allows the already wealthy to avoid paying taxes and supporting [public goods](../concepts/public-goods-problem.md) and the welfare state which supports people with less resources than wealthy individuals. Crypto thus exasperates wealth inequality and allows individuals to circumvent the rule of law and undermine the entire social contract of democracy.
#### Crypto facilitates dark money flows
For every one Alexandra Elbakyan or Edward Snowden there are a thousand arms dealers, cartels, human traffickers, money launderers, and warlords who would also use crypto for far less benign purposes.
See [Bitcoin as an Anti-Authoritarian Force][../notes/bitcoin-as-anti-authoritarian.md] for more details.
### Wider risk
We tried the complete laissez-faire *caveat emptor* securities model in the 1920s. **It ended very badly**. The kind of fly-by-night “There Will Be Blood” type of charlatans ran wild selling securities to the public.Most US states created Blue Sky Laws to "to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines and other fraudulent exploitations."
History is repeating itself. **Shibu Inu and Dogecoin were the blue sky securities of the 1920s**. People were attracted to get-rich-quick schemes back then just as much as they are today. Human psychology is remarkably invariant across time.
As part of the New Deal, the United States signed into law the Securities Act of 1933, Glass-Steagall Act of 1933, Securities Exchange Act of 1934. These largely cleaned up the fraud. The US framework is the blueprint for many industrialized nations to do the same. Following this introduction of regulation, the Great Depression ends, bank runs are entirely eliminated and there is a long period of peace in financial markets. US capital markets become extremely large, robust and a new era of unrivalled growth and private innovation proceeds.
When things go wrong, the impact can be financially devastating and socially corrosive: the state and its institutions and leaders are blamed and trust is corroded in the state as well as markets. If we assume that financial markets have some value then undermining faith in them is problematic.
### Crypto tokens should be regulated as securities
According to the SEC, crypto tokens meet the [Howey Test](../concepts/howey-test.md) and thus are securities contracts. This fits with our general intuition about the intent and purpose retail day traders are buying them. They’re investing in common ventures with the expectation of profit from the sale of tokens the same as equity. Some [DAO](../concepts/dao.md) governance tokens quite literally are designed to imitate voting shares as seen in existing equity structures.
---
# Full Analysis
## What Are Securities?
@ -62,6 +115,7 @@ Rufus and Stephen end their conversation with an analysis of this position and t
* Many policymakers on both sides of the aisle debate whether or not the accreditation laws are too restrictive and shut the public out of high-risk-high-return investments that only wealthy people have access to.
* On the right, then individual choice is a paramount, the government shouldn’t dictate risk-taking in markets. Just “evolution” and the natural state of being.
* On the left, Pikkety’s analysis that wealth generated from capital grows faster than economic output and that patrimonial capitalism leads to distortions of markets and inequality.
### Steel Manning the Position that Crypto Investments Should Not Be Brought Within The Securities Regulation Framework
* It is very easy to create an equity crowdfunding and cap table structure on top of crypto platforms like [ethereum](../concepts/ethereum.md).
* Individuals can do it anonymously and raise billions of dollar equivalents in seed capital for ventures that are very early. Don’t need to involve the SEC, government or lawyers at all.
@ -121,28 +175,62 @@ Rufus and Stephen end their conversation with an analysis of this position and t
***
## References
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1. Brownsword, Roger. 2020. Law 3.0: Rules, Regulation, and Technology. Routledge.
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1. Butler, Simon. 2021. ‘Cyber 9/11 Will Not Take Place: A User Perspective of Bitcoin and Cryptocurrencies from Underground and Dark Net Forums’. In Lecture Notes in Computer Science (Including Subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics), 12812 LNCS:135–53. Springer. https://doi.org/10.1007/978-3-030-79318-0_8.
1. Cumming, Douglas J., Sofia Johan, and Anshum Pant. 2019. ‘Regulation of the Crypto-Economy: Managing Risks, Challenges, and Regulatory Uncertainty’. Journal of Risk and Financial Management 12 (3): 126. https://doi.org/10.3390/jrfm12030126.
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1. Finck, Michèle. 2018. Blockchain Regulation and Governance in Europe. Blockchain Regulation and Governance in Europe. Cambridge University Press. https://doi.org/10.1017/9781108609708.
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1. Kraus, Daniel, Thierry Obrist, and Olivier Hari. 2019. Blockchains, Smart Contracts, Decentralised Autonomous Organisations and the Law. Edward Elgar Publishing. https://doi.org/10.4337/9781788115131.
1. Lee, Joseph. 2022. Crypto-Finance, Law and Regulation: Governing an Emerging Ecosystem. Routledge. https://www.routledge.com/Crypto-Finance-Law-and-Regulation-Governing-an-Emerging-Ecosystem/Lee/p/book/9780367086619.
1. Liaw, K. Thomas. 2021. ‘Trading and Regulation of Cryptocurrencies, Stablecoins and Other Cryptoassets’.
1. Maia, Guilherme, and João Vieira dos Santos. 2021. ‘MiCA and DeFi (“Proposal for a Regulation on Market in Crypto-Assets” and ’Decentralised Finance’)’. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3875355.
1. Rae, Shaela W, and Lorraine Mastersmith. 2019. ‘Crypto Asset Trading in Canada: Entering a New Era of Regulation’. Banking & Finance Law Review 35 (1): 153–85.
1. Reiners, Lee. 2020. ‘Cryptocurrency and the State: An Unholy Alliance’. S. Cal. Interdisc. LJ 30: 695.
1. Walch, Angela. 2015a. ‘The Bitcoin Blockchain as Financial Market Infrastructure: A Consideration of Operational Risk’. NYUJ Legis. & Pub. Pol’y 18: 837.
1. ———. 2015b. ‘The Bitcoin Blockchain as Financial Market Infrastructure: A Consideration of Operational Risk’. NYUJ Legis. & Pub. Pol’y 18: 837.
1. ———. 2019a. ‘Deconstructing ‘Decentralization’: Exploring the Core Claim of Crypto Systems’. C. Brummer (Ed.), Crypto Assets: Legal and Monetary Perspectives, 1–36. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244.
1. ———. 2019b. ‘In Code (Rs) We Trust: Software Developers as Fiduciaries in Public Blockchains’.
1. ———. 2019c. ‘Software Developers as Fiduciaries in Public Blockchains’. Regulating Blockchain. Techno-Social and Legal Challenges, Ed. by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos & Stefan Eich, Oxford University Press, 2019. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3203198.
de Andrés, P. _et al._ (2022) ‘Challenges of the market for initial coin offerings’, _International Review of Financial Analysis_, 79, p. 101966. Available at: [https://doi.org/10.1016/j.irfa.2021.101966](https://doi.org/10.1016/j.irfa.2021.101966).
Bank of International Settlements (2018) ‘Cryptocurrencies: looking beyond the hype’, in. Bank for International Settlements Basel. Available at: [https://www.bis.org/publ/arpdf/ar2018e5.htm](https://www.bis.org/publ/arpdf/ar2018e5.htm).
Bindseil, U., Papsdorf, P. and Schaaf, J. (2022) ‘The encrypted threat: Bitcoin’s social cost and regulatory responses’, (262), p. 20.
Boreiko, D., Ferrarini, G. and Giudici, P. (2019) ‘Blockchain Startups and Prospectus Regulation’, _European Business Organization Law Review_, 20(4), pp. 665–694. Available at: [https://doi.org/10.1007/s40804-019-00168-6](https://doi.org/10.1007/s40804-019-00168-6).
Brownsword, R. (2020) _Law 3.0: Rules, Regulation, and Technology_. Routledge.
Burilov, V. (2019) ‘Regulation of Crypto Tokens and Initial Coin Offerings in the EU: De lege lata and de lege ferenda’, _European Journal of Comparative Law and Governance_, 6(2), pp. 146–186. Available at: [https://doi.org/10.1163/22134514-00602003](https://doi.org/10.1163/22134514-00602003).
Butler, S. (2021) ‘Cyber 9/11 Will Not Take Place: A User Perspective of Bitcoin and Cryptocurrencies from Underground and Dark Net Forums’, in _Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)_. Springer, pp. 135–153. Available at: [https://doi.org/10.1007/978-3-030-79318-0_8](https://doi.org/10.1007/978-3-030-79318-0_8).
Cornish, C. and Waters, R. (2018) ‘Silicon Valley investors line up to back Telegram ICO’, _Financial Times_ [Preprint]. Available at: [https://www.ft.com/content/790d9506-0175-11e8-9650-9c0ad2d7c5b5](https://www.ft.com/content/790d9506-0175-11e8-9650-9c0ad2d7c5b5).
Cumming, D.J., Johan, S. and Pant, A. (2019) ‘Regulation of the Crypto-Economy: Managing Risks, Challenges, and Regulatory Uncertainty’, _Journal of Risk and Financial Management_, 12(3), p. 126. Available at: [https://doi.org/10.3390/jrfm12030126](https://doi.org/10.3390/jrfm12030126).
Debler, J. (2018) ‘Foreign initial coin offering issuers beware: the Securities and Exchange Commission is watching’, _Cornell Int’l LJ_, 51, p. 245.
Ferrari, V. (2020) ‘The regulation of crypto-assets in the EU – investment and payment tokens under the radar’, _Maastricht Journal of European and Comparative Law_, 27(3), pp. 325–342. Available at: [https://doi.org/10.1177/1023263X20911538](https://doi.org/10.1177/1023263X20911538).
Finck, M. (2018) _Blockchain Regulation and Governance in Europe_, _Blockchain Regulation and Governance in Europe_. Cambridge University Press. Available at: [https://doi.org/10.1017/9781108609708](https://doi.org/10.1017/9781108609708).
Goforth, C.R. (2021) ‘Regulation of Crypto: Who Is the Securities and Exchange Commission Protecting?’, _American Business Law Journal_, 58(3), pp. 643–705. Available at: [https://doi.org/10.1111/ablj.12192](https://doi.org/10.1111/ablj.12192).
Guadamuz, A. and Marsden, C. (2015) ‘Blockchains and Bitcoin: Regulatory responses to cryptocurrencies’, _First Monday_, 20(12). Available at: [https://doi.org/10.5210/fm.v20i12.6198](https://doi.org/10.5210/fm.v20i12.6198).
Hacker, P. _et al._ (2019) _Regulating Blockchain: : Techno-Social and Legal Challenges_. Available at: [https://doi.org/10.1093/oso/9780198842187.001.0001](https://doi.org/10.1093/oso/9780198842187.001.0001).
Hofman, D. _et al._ (2021) ‘Blockchain Governance: De Facto (x)or Designed?’, in _Building Decentralized Trust_. (x), pp. 21–33. Available at: [https://doi.org/10.1007/978-3-030-54414-0_2](https://doi.org/10.1007/978-3-030-54414-0_2).
Kapsis, I. (2021) ‘Should we trade market stability for more financial inclusion? The case of crypto-assets regulation in EU’, _FinTech, Artificial Intelligence and the Law: Regulation and Crime Prevention_, pp. 85–104. Available at: [https://doi.org/10.4324/9781003020998-9](https://doi.org/10.4324/9781003020998-9).
Kelly, J. (2019) ‘The ICO whose team members are literally cartoon characters’, _Financial Times_. Financial Times. Available at: [https://www.ft.com/content/57805b32-0bbe-34cb-940c-66cdd1aec5e2](https://www.ft.com/content/57805b32-0bbe-34cb-940c-66cdd1aec5e2).
Kharif, O. (2018) ‘Half of ICOs Die Within Four Months After Token Sales Finalized’, _Bloomberg.com_. Bloomberg. Available at: [https://www.bloomberg.com/news/articles/2018-07-09/half-of-icos-die-within-four-months-after-token-sales-finalized](https://www.bloomberg.com/news/articles/2018-07-09/half-of-icos-die-within-four-months-after-token-sales-finalized).
Kraus, D., Obrist, T. and Hari, O. (2019) _Blockchains, smart contracts, decentralised autonomous organisations and the law_. Edward Elgar Publishing. Available at: [https://doi.org/10.4337/9781788115131](https://doi.org/10.4337/9781788115131).
Lee, J. (2022) _Crypto-Finance, Law and Regulation: Governing an Emerging Ecosystem_. Routledge. Available at: [https://www.routledge.com/Crypto-Finance-Law-and-Regulation-Governing-an-Emerging-Ecosystem/Lee/p/book/9780367086619](https://www.routledge.com/Crypto-Finance-Law-and-Regulation-Governing-an-Emerging-Ecosystem/Lee/p/book/9780367086619).
Liaw, K.T. (2021) ‘Trading and regulation of cryptocurrencies, stablecoins and other cryptoassets’.
Maia, G. and Vieira dos Santos, J. (2021) ‘MiCA and DeFi (“Proposal for a Regulation on Market in Crypto-Assets” and ’Decentralised Finance’)’, _SSRN Electronic Journal_ [Preprint]. Available at: [https://doi.org/10.2139/ssrn.3875355](https://doi.org/10.2139/ssrn.3875355).
Rae, S.W. and Mastersmith, L. (2019) ‘Crypto Asset Trading in Canada: Entering a New Era of Regulation’, _Banking & Finance Law Review_, 35(1), pp. 153–185.
Reiners, L. (2020) ‘Cryptocurrency and the State: An Unholy Alliance’, _S. Cal. Interdisc. LJ_, 30, p. 695.
‘SEC v. WJ Howey Co.’ (1946) _US_. Supreme Court.
Walch, A. (2015) ‘The bitcoin blockchain as financial market infrastructure: A consideration of operational risk’, _NYUJ Legis. & Pub. Pol’y_, 18, p. 837.
Walch, A. (2019a) ‘Deconstructing ‘Decentralization’: Exploring the Core Claim of Crypto Systems’, _C. Brummer (ed.), Crypto Assets: Legal and Monetary Perspectives_, pp. 1–36. Available at: [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244).
Walch, A. (2019b) ‘In code (rs) we trust: Software developers as fiduciaries in public blockchains’.
Walch, A. (2019c) ‘Software Developers as Fiduciaries in Public Blockchains’, _Regulating Blockchain. Techno-Social and Legal Challenges, ed. by Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos & Stefan Eich, Oxford University Press, 2019._ [Preprint]. Available at: [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3203198](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3203198).

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notes/bitcoin-as-anti-authoritarian.md
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@ -1,6 +1,6 @@
---
title: Crypto can provide a transnational state-resistant payment system for dissidents
description: The claim being made here is that a. a transnational state-resitant payment system is desirable, b. crypto can provide this, and c. the benefits of this would outweigh any negative externalities. We find this claim to fail on points a. and c. and to therefore be false.
title: "Bitcoin as an Anti-Authoritarian Force: Crypto can provide a transnational state-resistant payment system for dissidents"
description: "Evaluating the thesis that Bitcoin (and crypto more generally) is an anti-authoritarian force and can help undermine tyranny by providing a state-resistant payment rail."
youtube: https://youtu.be/U_-Bdx1mqS8
podcast: https://anchor.fm/life-itself/episodes/Bitcoin-as-an-Anti-Authoritarian-Force-e1i25vg/a-a7gpq18
category:
@ -17,46 +17,49 @@ claim:
## Claim Steel-Manned
### Subclaim 1: Crypto can provide a state-resistant transnational payment rail
### Subclaim 1: A state-resistant transnational payment rail is desirable
A blockchain-based global supranational payment system which is censorship resistant against nation state actors would effectively allow parties from any jurisdiction to move value anonymously and with no controls.
Not everyone lives in a stable liberal democracy. Sometimes it’s necessary to circumvent the state, when laws are unjust or regimes are corrupt.
A global supranational payment system which is [censorship resistant](../concepts/censorship-resistence.md) against nation state actors would allow parties from any jurisdiction to move value anonymously and with no controls. Via such a payment system, individuals living under oppressive regimes as well as those resisting the regime could receive money and funding from anywhere in the world.
Nonviolent resistance and civil disobedience have some very notable success stories and are an important part of the arc of “moral universe bending towards justice”:
* Abolitionist movement
* Civil rights movement
* Nelson Mandela
* LGBT movement
* Gandhi's non-cooperation movement
* Anti Vietnam-war protests
### Subclaim 2: Crypto can provide a state-resistant transnational payment rail
Blockchain technology can provide us with this censorship-resistant global payment rail.
There are examples of crypto being used as a form of, or to facilitate, disobedience: Edward Snowden and Sci-Hub.
* Snowden speaks on the infosec conference circuit and likely receives all his speaker fees via bitcoin which he converts into Russian rubles.
* Sci-Hub pirates every scientific paper from Elvesier, Wiley, and other academic publishers and hosts a PirateBay style mirror site in which researchers can bypass paywalls and download paper. The server is run by one woman in Russia, Alexandra Elbakyan, who takes crypto donations. She is seen as a folk hero giving knowledge to the world and advancing science.
### Subclaim 2: An unregulated transnational payment rail is desirable
Not everyone lives in a stable liberal democracy. Sometimes it’s necessary to circumvent the state, when laws are unjust or regimes are corrupt.
Crypto can provide a privacy-friendly way to store or transfer funds in situations where the state is an adversary – for example, when opposing a repressive regime.
## Evidence of claim being made
ALJAZEERA. ‘Crypto Provides Fix for Some in Crisis-Hit Afghanistan’, 21 March 2022. https://www.aljazeera.com/news/2022/3/21/crypto-provides-fix-for-some-in-crisis-hit-afghanistan:
> Digital currencies and their decentralised architecture, impervious to international sanctions, are allowing a handful of young Afghans to avoid the worst of the crisis.
Lyn Alden [@LynAldenContact] (2022) _Twitter_. Available at: [https://twitter.com/LynAldenContact/status/1529084598268968962](https://twitter.com/LynAldenContact/status/1529084598268968962) (Accessed: 14 September 2022).
> People from Nigeria, Ethiopia, Senegal, Togo, Venezuela, and Afghanistan keep telling me here in person how they use bitcoin to deal with authoritarian bank control or persistent inflation that continually wrecks their savings. While westerners on Twitter say it’s useless.
Lyudmyla Kozlovska quoted in Aderinokun, Ire. _et al_. ‘21 Human Rights Advocates Write to Congress about Bitcoin’s Humanitarian Benefits’, 21 June 2022. [https://www.financialinclusion.tech/](https://www.financialinclusion.tech/)
> For me, Bitcoin is not just technology. It has literally saved the lives of my friends and many Ukrainians. Without it, we would not have been able to raise money so quickly to pay for protective equipment for soldiers in the early days of the Russian invasion
> For me, Bitcoin is not just technology. It has literally saved the lives of my friends and many Ukrainians. Without it, we would not have been able to raise money so quickly to pay for protective equipment for soldiers in the early days of the Russian invasion.
Tapscott, Alex. ‘Commentary: Bitcoin Offers Freedom from Political Repression—and That’s a Key to Its Future’. Fortune, 18 February 2021. [https://fortune.com/2021/02/18/bitcoin-censorship-political-repression-deplatforming-china-belarus-russia-nigeria-crypto/](https://fortune.com/2021/02/18/bitcoin-censorship-political-repression-deplatforming-china-belarus-russia-nigeria-crypto/).
> Bitcoin is censorship-resistant. In other words, government cannot throttle, control or monitor your behavior as they can in the legacy financial world.
## Evaluation
### Subclaim 1: Crypto can provide a state-resistant transnational payment rail
Crypto assets are not a safe haven for one’s investments or a shield against government tyranny. In his whitepaper _Bitcoin, Currencies, and Fragility_, Nassim Taleb rebukes the "safe haven from tyranny" thesis:
> By its very nature, bitcoin is open for all to see. The belief in one’s ability to hide one’s assets from the government with a public blockchain easily triangularizable at endpoints, and not just read by the FBI but also by people in their living rooms, requires a certain lack of financial seasoning and statistical understanding — perhaps even a lack of minimal common sense. For instance a Wolfram Research specialist was able to statistically detect and triangularize "anonymous" ransom payments made by Colonial Pipeline on May 8 in 2021 — and it did not take long for the FBI to restore the funds. We can safely assume that government structures and computational power will remain stronger than those of distributed operators who, while distrusting one another, can fall prey to simple hoaxes
>
> [..] The slogan "Escape government tyranny hence bitcoin" is similar to advertisements in the 1960s extolling the health benefits of cigarettes.
The massive power asymmetries of authoritarian regimes and their control over both traditional payment rails and domestic implies that dissidents attempting to use crypto assets to circumvent repression or capital controls will find it very difficult to move assets or cash out. Without the capacity to cash out, the efficacy of their actions is fundamentally limited to external geographic regions outside of the authoritarian regimes. Since no action can be effected internal to the regime this refutes the argument that crypto assets are an effective tool for dissidents.
This is best evidenced by the Canadian convoys in 2022 which attempted to take international donations in crypto assets and found themselves and their accounts frozen by both banks and Canadian [crypto exchanges](../concepts/crypto-exchange.md) which blocked transactions under [illicit financing](../concepts/illicit-financing.md) laws. This made using the donations to purchase supplies impossible and undermined the [crypto assets](../concepts/cryptoasset.md) narrative.
The complete ban of [crypto assets](../concepts/cryptoasset.md) by the People's Republic of China also does not lend credibility to the thesis that [crypto assets](../concepts/cryptoasset.md) are outside the remit of authoritarian controls and their restriction on capital movement and controls over domestic [money services business](../concepts/money-services-business.md).
### Subclaim 2: An unregulated transnational payment rail is desirable
### Subclaim 1: An unregulated transnational payment rail is desirable
From the perspective of civil society a global supranational payment system which is [censorship resistant](../concepts/censorship-resistence.md) against nation state actors **is not desirable**. The world already struggles with an excess of offshore tax evasion and dark money flows, as evidenced by the recent Panama Paper leaks.
@ -72,6 +75,28 @@ From the public interest perspective none of this setup is desirable, since it a
For every one Alexandra Elbakyan or Edward Snowden there are a thousand arms dealers, cartels, human traffickers, money launderers, and warlords who would also use crypto for far less benign purposes.
### Subclaim 2: Crypto can provide a state-resistant transnational payment rail
Even if a blockchain-based state-resistant transnational payment rail *were* desirable, blockchain is not an effective way of achieving this.
In his whitepaper _Bitcoin, Currencies, and Fragility_, Nassim Taleb rebukes the "safe haven from tyranny" thesis:
> By its very nature, bitcoin is open for all to see. The belief in one’s ability to hide one’s assets from the government with a public blockchain easily triangularizable at endpoints, and not just read by the FBI but also by people in their living rooms, requires a certain lack of financial seasoning and statistical understanding — perhaps even a lack of minimal common sense. For instance a Wolfram Research specialist was able to statistically detect and triangularize "anonymous" ransom payments made by Colonial Pipeline on May 8 in 2021 — and it did not take long for the FBI to restore the funds. We can safely assume that government structures and computational power will remain stronger than those of distributed operators who, while distrusting one another, can fall prey to simple hoaxes
>
> [..] The slogan "Escape government tyranny hence bitcoin" is similar to advertisements in the 1960s extolling the health benefits of cigarettes.
The massive power asymmetries of authoritarian regimes and their control over both traditional payment rails and domestic implies that dissidents attempting to use crypto assets to circumvent repression or capital controls will find it very difficult to move assets or cash out. Without the capacity to cash out, the efficacy of their actions is fundamentally limited to external geographic regions outside of the authoritarian regimes. Since no action can be effected internal to the regime this refutes the argument that crypto assets are an effective tool for dissidents.
This is best evidenced by the Canadian convoys in 2022 which attempted to take international donations in crypto assets and found themselves and their accounts frozen by both banks and Canadian [crypto exchanges](../concepts/crypto-exchange.md) which blocked transactions under [illicit financing](../concepts/illicit-financing.md) laws. This made using the donations to purchase supplies impossible and undermined the [crypto assets](../concepts/cryptoasset.md) narrative.
The complete ban of [crypto assets](../concepts/cryptoasset.md) by the People's Republic of China also does not lend credibility to the thesis that [crypto assets](../concepts/cryptoasset.md) are outside the remit of authoritarian controls and their restriction on capital movement and controls over domestic [money services business](../concepts/money-services-business.md).
## Conclusion
The claim being evaluated here is that a) a transnational state-resitant payment system is desirable, and b) crypto can provide this. We find this claim to fail on both points.
---
# Full Analysis
## Steel-Man