SBF Defends Regulation Proposals in Two-Hour Debate
“If DeFi Front-ends Catering To Americans Need To Be Licensed, DeFi in America Dies,” says Erik Voorhees
Regulation is coming, and before it does, the crypto industry must know what it’s willing to sacrifice, FTX CEO Sam Bankman-Fried (SBF) argued in a live debate with ShapeShift CEO Erik Voorhees Friday.
Last week, SBF became crypto’s villain du jour after proposing a set of voluntary standards the industry could adopt as it awaits regulation from US lawmakers, who have been debating a bill titled the Digital Currency Consumer Protection Act (DCCPA).
DeFi purists panned the proposals on social media, which included built-in compliance with US sanctions as well as the regulation of organizations that build the websites through which most people access decentralized finance.
Voorhees became one of his most prominent critics. Their two-hour debate Friday, hosted by crypto podcast Bankless, presented an opportunity for the sparring partners to defend their positions with the depth and nuance the issue demands, according to Ryan Sean Adams, who hosted the event.
Voorhees, whom Adams describes as a “crypto libertarian philosopher,” said the most troubling of Bankman-Fried’s proposals was the regulation of entities that build the websites, or front-ends, that allow the average person to access DeFi.
‘Entire Point’ of DeFi
“That line should not be crossed,” Voorhees said. “The entire idea of this is open, permissionless finance, and when we say that, it is not just a slogan — it is the entire point. And if you exclude 99% of people from open, permissionless finance, then all you’ve done is create a more complicated, more expensive TradFi system.”
Throughout the debate, Bankman-Fried stressed that he does not support or welcome the regulation of decentralized finance. Like it or not, however, it’s coming, he said.
“The most important thing is that smart contracts, validators and payments remain open and free,” he said. “Because of that, I am relatively willing to accept compromises if they preserve the things that I believe have the vast majority of the value for DeFi.”
Voorhees said he is skeptical lawmakers will craft net-positive regulations, and pointed to a New York law that requires would-be crypto exchanges there to apply for a “Bitlicense.” Only a handful of exchanges operate in New York, and Voorhees pointed out that the “monstrous” law was passed despite ample input from the crypto industry.
That early lobbying effort was far less sophisticated than current-day crypto lobbying, Bankman-Fried responded.
“I’m optimistic that we will end up striking a balance, where [the DCCPA] will do a good job of providing a large ratio of customer protection to restriction of commerce,” he said.
But Voorhees also believes Bankman-Fried — who has been lobbying federal lawmakers to pass industry-friendly regulations — is compromising too much, too soon.
“If we agree that the heart or the brain is the most important part of the body, we would not so readily surrender our arms and our legs to be chopped off,” Vorhees said. “If DeFi front-ends catering to Americans need to be licensed, DeFi in America dies… people will not use DeFi through licensed front ends because it will simply look like CeFi; there will be no meaningful distinction.”
Bankman-Fried said Voorhees is overstating the threat of front-end regulation.
“I don’t think that permissionless-ness is binary — I think that there are shades of gray here,” he said. If “an American hosted [interface] for American retail, hosted in a centralized way on a centralized cloud server, requires some sort of financial license, I don’t think that basically breaks DeFi.