US Regulation Is Killing the Crypto Spirit

From third-party censorship to self-censorship, the so-called anti-censorship spirit of encryption is long gone.

Last night, Bitcoin developer and observer @0xB10C published a report titled "Six OFAC-approved transactions missing - is the Asian mining pool the first to comply with US sanctions?" on the social platform. The report pointed out that F2Pool filtered blocks 810727 and 813357, and the missing four OFAC-approved transactions may have been filtered.

OFAC imposes economic and trade sanctions against targeted foreign countries and regimes, terrorists, international narcotics traffickers, persons engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States in accordance with the foreign policy and national security objectives of the United States.

F2Pool is the third largest Bitcoin mining pool. When Wang Chun, co-founder of F2Pool, responded, "Why are you surprised that I rejected these criminals' transactions? CZ deserves what he gets," he seemed to admit that F2Pool did not intentionally omit transactions from the package. The response has now been deleted. But obviously, he thinks he is right.

Optimistically speaking, a single pool filtering transactions will not affect the censorship resistance of the entire Bitcoin network, and the Bitcoin network can still continue to work normally.

But this sentence in the report: "But why is F2Pool, which originated in Asia, the first pool to filter transactions based on US OFAC sanctions?" makes people sigh.

Yesterday, November 22, 2023, was not only recorded in the history of Binance, but also in the history of cryptocurrencies. In order to reach a settlement with the regulator, the largest cryptocurrency exchange platform with the largest trading volume took out $4.3 billion.

CZ let go of the work he had done in his six years of entrepreneurship and officially became a thing of the past, pleading guilty to anti-money laundering and violating U.S. sanctions and stepping down as CEO in exchange for a stable path for Binance’s future.

CZ appears in Seattle court, source: GeekWire

The US regulators are using the tactic of "killing the chicken to scare the monkey", and all crypto practitioners are in danger.

Starting in August 2022, the Office of Foreign Assets Control (OFAC) under the U.S. Treasury Department announced sanctions on the cryptocurrency mixer Tornado Cash, claiming that the service had laundered more than $7 billion in the past three years and helped the North Korean state-run hacker group Lazarus Group evade U.S. penalties.

This year, the SEC took enforcement action against an NFT project for the first time, charging Impact Theory, a Los Angeles-based media and entertainment company. Impact Theory agreed to stop the lawsuit and will pay approximately $6.1 million in “disgorgement, prejudgment interest, and civil penalties.”

In addition, DeFi has also been included in the regulatory review list. The decentralized stablecoin protocol MakerDAO announced the launch of the DeFi lending protocol Spark Protocol centered on the stablecoin DAI, but it is not available in the United States or IP addresses. Its terms of service also prohibit US users from using VPNs to hide their US residence. Users in other non-US regions are also prohibited from using VPNs.

Before the "execution", some people used fines to get the regulators to be "lenient". Before the next wave of arrests, the regulators just raised their hunting rifles and scared away a group of people, none of whom wanted to be the next person to be executed.

On March 22, Coinbase's chief legal officer published an article titled "We asked the SEC to provide reasonable crypto rules for Americans, but what we got was legal threats." The tone of the article is very sad, and it mainly talks about one thing, that is, pushing the SEC to clarify regulatory policies has been fruitless. However, according to the article, Coinbase actively requested compliance, held more than 30 meetings with the SEC, and spent millions of dollars to study registration methods, but did not receive a response during the 9 months.

While young crypto people are still obsessed with the rebellious and pure spirit of crypto, the old guard are forced to think about the way out of "KYC", "compliance" and "regulation" under US supervision.

This year marks the tenth anniversary of the Snowden incident, but the so-called "privacy" and "anti-censorship" of the encryption spirit have been killed. It is American politics and American regulation that have bent the backbone of the encryption spirit with one punch after another.

This is no longer the era of encryption, but the era of regulation. Snowden, who is far away, sighed helplessly for the spirit of encryption.