{"id":108865,"date":"2021-01-19T21:14:04","date_gmt":"2021-01-19T21:14:04","guid":{"rendered":"https:\/\/precoinnews.com\/?p=108865"},"modified":"2021-01-19T21:14:04","modified_gmt":"2021-01-19T21:14:04","slug":"decentralization-in-the-centers-of-power-learn-crypto-from-bidens-sec-chair-pick-part-3-3","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/crypto\/decentralization-in-the-centers-of-power-learn-crypto-from-bidens-sec-chair-pick-part-3-3\/","title":{"rendered":"Decentralization in the centers of power: Learn crypto from Biden's SEC chair pick, part 3\/3"},"content":{"rendered":"

This is the third article in a three-part series based on Gary Gensler’s extensive prior public statements on crypto. Here are parts 1 and 2.<\/em><\/p>\n

Cointelegraph has been busily digging through a treasure trove of likely future Chairman of the Securities and Exchange Commission Gary Gensler\u2019s thoughts on crypto, especially from a series of lectures he gave at MIT in the fall of 2018. One especially notable element of Gensler\u2019s thinking is his obvious respect for Bitcoin\u2019s mechanism of internal governance and his obvious interest in seeing that decentralization elsewhere in finance.<\/p>\n

12 years out from BTC\u2019s genesis block, there aren\u2019t many serious characters in the U.S. federal government calling for anything as misguided as a Bitcoin ban. Even antagonists recognize that such a measure would be impossible. But beyond just tolerance, Gensler is clearly intrigued by Bitcoin\u2019s mechanisms for internal decentralized regulation and bullish on applying their principles elsewhere in finance.<\/p>\n

Gensler goes decentral<\/h3>\n

Famously, the SEC has decided that Bitcoin is a commodity, falling under the purview of the Commodity Futures Trading Commission (which Gensler chaired during the Obama years) rather than the SEC. Consequently, Gensler\u2019s decisions at the SEC will be fairly oblique in the way that they touch the original cryptocurrency, but his overall appraisal of Bitcoin\u2019s governance shows a refreshing level of knowledge, as well as an obvious respect for the tenets of decentralization. <\/p>\n

\u201cThere’ve been many efforts that all died, until Bitcoin, to crack that riddle that we talked about: peer-to-peer money without a central authority,\u201d Gensler said, while discussing Satoshi Nakamoto\u2019s original whitepaper with a crowded lecture hall. Beyond simply being impressed with the technological achievement of Bitcoin and its “monetary policy that limits the supply of the currency,” he was supportive of the ability for transactions to be free from third parties.<\/p>\n

\u201cWhen you’re dealing with a central authority, a commercial bank, they can decide whether\u00a0to extend credit or not. That’s a form of censorship. It’s a form of allocating something,\u201d Gensler said. \u201cBut distributed decentralized platforms are more censorship resistant<\/p>\n

It\u2019s almost paradoxical to think of someone so deeply ingrained in the traditional centers of financial power. Before his regulatory career, Gensler got his start in finance working for Goldman Sachs. He\u2019s coming from very much the centers of power, which makes it pretty remarkable that he identifies established industry players as pushing for regulation at the expense of new start-ups:<\/p>\n

\u201cOne thing that wasn’t mentioned is sometimes institutions want to be regulated\u00a0over time, because it creates barriers to entry. It’s usually not at an early stage. But later on, it creates some barriers to entry, and it’s actually the incumbents who often collect some economic rents.\u201d<\/p><\/blockquote>\n

The many costs of mining<\/h3>\n

Mining is obviously a central feature of Bitcoin\u2019s system of governance. It\u2019s also remarkably controversial, with recent estimates saying that the Bitcoin network consumes more energy than the Netherlands. Indeed, the bad PR of Bitcoin\u2019s electricity use has inspired a surge of renewable energy firms to enter the industry. But Gensler took time from his lecture to defend Bitcoin\u2019s energy use as compared to the many overlooked externalities of all the other monetary systems of the world:<\/p>\n

\u201cI would note that all strong currencies \u2014 strong monies \u2014 for centuries have had something to limit the supply. And so now we’re doing it electronically and through this mining. That doesn’t mean it’s the best use. I’m just saying it’s another way. Extracting gold out of the ground is very hard. And in the 19th century, to have big vault doors and security guards with rifles was a way to insure it. And one could even say that having central banks takes cost.\u00a0So I think of it as a trade-off of how you ensure a currency as a harder currency to create.\u201d<\/p><\/blockquote>\n

Limits, though<\/h3>\n

Despite his clear sympathy for decentralization, Gensler is not exactly bullish on Bitcoin. \u201cWe’re not going to be a Bitcoin minimalist or maximalist. I’m probably, to self-disclose here, a little bit center-minimalist on Bitcoin,\u201d he says to his classroom at one point. Later on, he told the class that he did not own any Bitcoin himself \u2014 although, as always, that could be OPSEC. <\/p>\n

On the subject of mining, Gensler noted several long-standing concerns aside from energy usage. One is that the massive mining pools have effectively centralized the system, rendering a 51% attack more likely than is comfortable. Another is that Gensler suspects that the most successful miners are successful based on illegal activity: <\/p>\n

\u201cI truly believe \u2014 but can’t factually prove \u2014 a number of the biggest mining pools or miners are in places where they’re doing illicit activity. They’re getting their electricity for less than what it’s really costing on the grid by bad actors.\u201d<\/p><\/blockquote>\n

Even these issues with the particularities of Bitcoin don\u2019t diminish the fact that Gensler clearly believes in the importance of decentralizing governance. \u201cI’m more into democratizing capital markets,\u201d he says at one point.<\/p>\n

So what does all of this mean? Gensler is certainly no crypto-anarchist, and he\u2019s definitely not interested in rolling back crypto regulation to where it was in 2018. But his sympathy towards decentralizing finance is clearly strong. In his lectures, he comes off sympathetic to strong protections for transactional privacy and the process of crypto tokens beginning their lifecycles as centralized projects before becoming decentralized currencies. This will be a critical area at the SEC, especially as co-commissioner has already spent the last year pushing for a safe harbor for such projects. <\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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