America is an “aging empire” and is falling behind on crypto

BeInCrypto spoke exclusively with Omid Malekan, a professor at Columbia Business School and the author of Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets and Platforms.

Omid Malekan first discovered Bitcoin in 2013, after a friend asked him to buy something on his friend’s behalf. – Before that I had no interest. My impression of Bitcoin was, like many people at the time, that it’s just a weird internet thing that appeals to drug dealers,” Malekan said. However, he quickly changed his mind about actually interacting with Bitcoin. His “revelation” came when cryptocurrency exchange Mt. Gox was hacked in 2014.

At the time, it was the largest exchange of its kind in the world, handling over 70% of all Bitcoin transactions worldwide. It was the notion of digital scarcity that triggered the disclosure. “For the first time in the history of the internet, something valuable was stolen and it could not be replaced. And that wasn’t possible before Bitcoin. It was this revelation that sent me down the rabbit hole. It has turned into a whole career.”

Fast forward a decade later, and Malekan is teaching students about crypto at Columbia Business School. Possibly the world’s most prestigious business school after Harvard. He has also written several books on the subject. The last is Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets and Platforms.

The Aging Empire

As an American, Malekan has had a front row seat watching the US turn towards crypto. Running a crypto business, or even trading cryptocurrency, in the country is becoming more difficult. Banking regulators have increasingly sought to drive crypto out of the financial system. Law firm Cooper & Kirk has described this as “Operation Chokepoint 2.0.” (The original Operation Choke Point was an initiative launched by the Justice Department in 2013 to investigate banks that do business with high-risk companies such as payday lenders, firearms dealers and online gambling sites. Critics argued it unfairly targeted legitimate businesses and limited access to credit. The Trump administration ended the operation in 2017.)

Gary Gensler’s tenure as chairman of the SEC has been marked by an anti-crypto stance. The Biden White House now sees crypto as more of a threat than an opportunity.

Malekan described the attitude of the US government as ill-informed. “It’s counterproductive,” he said. “I am almost embarrassed to say that America is now behaving like an aging empire that only feels threatened by a new kind of financial system. And instead of trying to figure out how to evolve to embrace that, there’s this hubris within these regulatory circles that, well, we’re just going to stop it. We will deal with crypto on our terms … using very antiquated laws.”

“Ultimately, this technology will become mainstream because it solves important problems,” Malekan explained. “It’s also extremely global, and it’s borderless, so if it doesn’t find a home in America, it will find a home elsewhere. And that means that much of the jobs and tax revenues will now accrue to countries outside the United States.”

Looking for a solution to a problem?

One of the most common criticisms of cryptocurrency and blockchain is that they are a “solution looking for a problem.” Many of the world’s most cited financial and technical minds have criticized the technology, including Bill Gates and economist Paul Krugman. Warren Buffet has called crypto “rat poison squared” and said: “they will come to a bad end.”

How does Malekan respond to the claim that crypto doesn’t solve any real problems?

“I could spend hours talking about this,” he said. “When you hear someone make that claim – and I’ve heard it too – almost universally, it’s a wealthy elite living in the highly developed world. It’s usually someone like a professor or a banker in a place like New York or London. It’s very telling when they say things like, well, we don’t need blockchain or crypto because we have credit cards. Apparently it doesn’t occur to these people that the vast majority of people on the planet don’t have a credit card. Merchants and businesses would like to find an alternative to credit cards because of the fees they are forced to pay. Even in places like New York.”

The dismissive attitude is an insult to the millions who use crypto, he said. “To say that is to say they’re all idiots and have no idea what they’re doing.”

“If we want to break it down to details, there are many people who have used Bitcoin as a way to protect their purchasing power against very high inflation. There are also many artists who have found that NFTs give them new ways to earn for a living and interact with fans on. There are companies that have started using things like stablecoins to make cross-border payments more efficient. And the list goes on and on and on.”

Crypto’s tribalism

Malekan also has many reservations about crypto, especially the “speculative profit.” But most of all, he hates “the tendency to rally behind these prophets and outspoken leaders who then turn out to be criminals and psychopaths like Sam-Bankman-Fried.” It’s “a very crypto thing.”

The crypto community also tends to treat their favorite coins like football teams. Constantly challenging each other to prove that their project is the best.

“I think sometimes they act like they’re actually religious movements,” Malekan said. “They have their merits, and then they excommunicate those in the movement who dare to question what the fundamentalist view is.”

“I’m always amazed when I meet people who really believe in that one project and one coin and reject everyone else out there. To me it is absurd. There has never been a technology that has only one exact application.”

“Money has always lent itself to this kind of tribalistic passion. And then beyond that, unfortunately, this is the world we live in on social media and the polarization and tribalism of everything.”