Forget Bitcoin, Coinbase CEO Advocates US-Backed Stablecoin (Op-Ed)
In a post-FTX world, it is very difficult to be a crypto leader.
Not only are your bags empty and your income down, but you also have US financial regulators breathing down your neck with subpoenas one day and lawsuits the next.
It is therefore understandable why industry leaders such as Brian Armstrong want to present themselves to both the media and authorities with their state-worshipping foot in front.
As CEO of Coinbase — America’s largest crypto exchange — one wrong move could land his company sued and regulated beyond repair by politicians already paranoid about a fraud-ridden industry. After all, what reason does the government have left to not just ban crypto altogether?
In a media blitz earlier this week, the executive branch attempted to answer that question: supporting “crypto” while still appealing to the US government’s best interests. However, the result saw him promote a use of crypto that was most antithetical to the ethos of “decentralization” that Bitcoin was born into.
That’s right: Brian Armstrong advocates a US government-issued stablecoin.
Armstrong’s case for crypto in America
In a op-ed published with CNBC on Wednesday, Armstrong made his usual case for why the US should be more welcoming to crypto, so as not to drive the industry offshore. Doing so will have countless negative consequences which can be roughly summarized in three points:
- The United States would fall behind in technological and financial innovation relative to its international competitors, and lose out on many consumer benefits.
- The crypto industry will grow in an unstable and unregulated environment offshore – or in jurisdictions that simply have clearer rules.
- The dollar’s prominence on the world stage will continue to weaken and risk being overtaken.
The final issue is what Armstrong’s stablecoin idea is intended to address. As he writes:
“Imagine a world where the US issues its own USD stablecoin on the blockchain. Not only would this provide access to the dollar to millions of previously unbanked and underbanked people, but it would also be the de facto digital currency for remittances and international currency transfers ensuring that the dollar remains the global reserve currency both on and off the chain. .”
Stablecoins VS CBDCs
The idea of using stablecoins and other cryptos for international transfers is nothing new. MoneyGram collaboration with the Stellar blockchain last year for this very purpose, and even some central bankers have recognized their potential in the remittance market.
But advocating for a government-issued stablecoin — as opposed to a privately issued token like Tether’s USDT or Circle’s USDC — is a different story. Such a token would be virtually indistinguishable from a central bank digital currency (CBDC), as even pro-crypto congressmen understand has the potential to be weaponized as a state surveillance tool.
The Federal Reserve is already in talks about what a potential CBDC might look like. In September, Chairman Jerome Powell claimed that a US CBDC would be “private” but not “anonymous” – meaning it would still be a permission-based system that verifies the identity of users.
Whether one trusts the Federal Reserve not to invade America’s privacy like this—and not to move to a 100% government-controlled ledger like China’s digital yuan—is another story. Ultimately, the CBDC requires users trust a centralized intermediary to not censor, freeze, limit or devalue their money.
Aren’t these the problems that Bitcoin – the first decentralized public blockchain – was meant to solve?
The true point of Bitcoin and decentralization
Let’s go back to another one of Armstrong’s points about crypto’s many benefits, as he lists them in his article:
“Crypto is a faster, more private, efficient, cheaper and user-driven financial system. It’s not a replacement for the traditional financial system, it’s an update.”
While not everything about this claim is necessarily false, it really misses the point. Bitcoin was never originally created to be a more efficient payment rail.
At its core, Bitcoin is an open, neutral, borderless, censorship-resistant monetary network. It is often called a system of “rules without rulers” that uses proof of work to remain credible and secure (a consensus mechanism often criticized for being high inefficient.)
Some of Bitcoin’s biggest proponents consider it a check authoritarianism, which allows users living in both repressive and hyperinflationary regimes to retain control of their money and purchasing power. In short: Bitcoin embodies freedom.
As a functional, trustless monetary system, Bitcoin actually solves the problems that justify the existence of central banking and fiat currency to begin with. To quotation Satoshi Nakamoto:
“The root problem with conventional currency is all the trust required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is littered with breaches of that trust. The banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”
How do we square this with Armstrong’s argument that crypto is not a “replacement” for the financial system?
Compared to the level of control the state has over the banking establishment today, Bitcoin provides a far more liberating alternative. It puts digital property rights in the hands of their holders, taking them back from a banking establishment that has controlled them for decades as a mere byproduct of technological limitation.
In that sense, Bitcoin is the opposite of the government stablecoin that Armstrong idealized. It removes control from our time’s monetary authorities – such as the US – rather than strengthening them.
Given that “decentralization” has been crypto’s favorite buzzword for the past decade, it is a good thing right?
The inevitable betrayal of Crypto’s leaders
Decentralization may sound good from a humanitarian perspective – but for Coinbase? It’s just bad for business.
Sure, it sounds good to the army of crypto-loving libertarians who value such things. But for a regulated, publicly traded company in the US, it’s hard to go into too much detail about what “decentralization” entails without tempting the authorities to come after you.
As things stand, Coinbase is already under great legal pressure from the SEC that only hurts the bottom line. Explaining to the government how crypto gives consumers direct access to a technology that threatens its geopolitical control would only worsen Coinbase’s relationship with regulators — as with the entire industry.
So explains Armstrong’s strange inclination to promote highly antithetical crypto-technology as a government-issued stablecoin, in favor of true cypherpunk values. His primary incentive is to keep the company and the industry alive, even if that requires twisting crypto into something unrecognizable.
Know that this is nothing new. Circle, a stablecoin company closely tied to Coinbase, did not hesitate to break the crypto’s “censorship-resistant” ethos in August, when it froze USDC locked within OFAC flagged Tornado Cash addresses. Even as he voiced opposition to the Treasury’s policy, the company’s hands were tied in enforcing the new rules under the requirements of the Bank Secrecy Act.
Former FTX CEO Sam Bankman-Fried (SBF) (if red flags is much easier to spot in retrospect after recent events) was far less shameless than that. Just a few weeks before his exchange imploded, he was active argued for to regulate DeFi using similar OFAC blacklists and require DeFi front-end providers to register as broker-dealers. Naturally, he was widely criticized by the crypto community for effectively defeating the purpose of DeFi with such rules.
Even CBDCs are not a new idea for crypto leaders. Joseph Lubin – co-founder of Ethereum and CEO of ConsenSys – previously supported the issuance of CBDCs on the Ethereum blockchain, within a 28-page CBDC white paper published by the company.
“The CBDC provides central banks with forward-looking tools to allow them to implement monetary policy in more direct, innovative ways and keep pace with technological change,” he wrote.
Leaders like Armstrong, Allaire, SBF and Lubin may or may not have crypto’s core values at heart. Anyway, each is just a crypto brother second, and a businessman first. Seeing them forced to side with the government over values was only a matter of time.
