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Don’t Forget the Importance of Censorship Resistance

Since people are once again talking about self-custody as one of crypto’s unique strengths, I would like to remind everyone about an equally important fundamental value proposition of crypto that, in the early days, was touted as the killer feature. I’m talking about censorship resistance.

The following opinion editorial was written by CEO Dennis Jarvis.

The Three Pillars of Censorship Resistance

In the financial context, censorship resistance is the ability to carry out financial actions despite the wishes of any third party.

In crypto, the three pillars of censorship resistance are:

The freedom to transact. This means third parties cannot prevent you from sending or receiving assets.

The freedom from confiscation. Third parties cannot take away or freeze your assets.

The immutability of transactions. It is impossible for third parties to change or revert transactions after the fact.

Troubling actions increasingly taken by centralized entities in the public and private sector demonstrate the importance of censorship resistance. Let’s look at some examples:

Public Sector Censorship

Governments have shown an increased willingness to exert control of financial institutions while also ratcheting up their crypto regulatory efforts. Earlier in the year, Trudeau’s Canadian government took the unprecedented step of invoking emergency powers to freeze or suspend the bank accounts of Canadian citizens without court orders. Their crime? Donating funds to fellow citizens participating in the Freedom Convoy protests.

The U.S. Treasury Department’s watchdog the Office of Foreign Asset Control (OFAC) made headlines this summer by banning and sanctioning addresses that used Tornado Cash, a decentralized application that improved privacy for users by “mixing” ETH.

The U.S. Securities and Exchange Commission (SEC) increased crypto regulatory actions, best exemplified by this quote from SEC Chairman Gary Gensler who said, “…the SEC will serve as the cop on the beat. As with seat belts in cars, we need to ensure that investor protections come standard in the crypto market.” This isn’t merely empty rhetoric, the SEC nearly doubled the size of the Division of Enforcement’s Crypto Assets and Cyber Unit in 2022.

Private Sector Censorship

Post-merge, a majority of Ethereum’s blocks are compliant with OFAC. This is a potential problem because OFAC-compliant relays will not include any transactions that interact with the Tornado Cash smart contract or other sanctioned wallet addresses as designated by OFAC. Not all blocks built by OFAC compliant relays are censoring, however, all blocks built by OFAC compliant relays will censor when non-compliant transactions are broadcast to the network. As Martin Köppelmann, the co-founder of Gnosis, noted about the state of OFAC compliant relays, “[t]his means if the censoring validators would now stop attesting to non-censoring blocks they would eventually form the canonical, 100% censoring chain.”

Centralized stablecoin companies Tether (USDT) and Circle (USDC) have a history of cooperating with law enforcement requests to freeze assets. Circle complied with OFAC’s Tornado Cash sanctions by banning “tainted” USDC. So far Tether has decided to not comply, but that can change (and probably will, given sufficient pressure) in the future.

Outside of crypto, Paypal made international news when it released an updated policy that let Paypal fine users $2,500 for spreading ‘misinformation.’ Paypal quickly retracted the policy in public, though much of the language remains. This includes $2,500 fines that have existed since September 2021 for the very vague “promotion of hate, violence, racial or other forms of intolerance that is discriminatory…”

While Paypal was almost universally condemned, its actions are consistent with a growing number of web2 companies, such as Twitter, Youtube, and Facebook, who are using their platforms to punish behavior they deem “bad” through levers like demonetization, suspensions, and bans.

Censorship Resistance Is the Antidote

Censorship resistance is one of the main value propositions of decentralized finance in general and Bitcoin specifically because it fundamentally separates the technology from any traditional financial tools. In fact, censorship resistance is so strong in Bitcoin as to render it an economic freedom enhancing technology. This dramatization powerfully demonstrates why:

The silver lining to the concerning increase in authoritarian actions from both the public and private sector is that they are helping refocus attention on censorship resistance.

Bitcoin, once the embodiment of crypto, had become ridiculed as worse than boring — antiquated. It’s nice to see this begin to shift back as people inside and out of crypto reacquaint themselves with its deceptively simple power.

Within the crypto industry, more people are paying attention to the slow creep of web2-like features of speed and cheap transactions that are coming at the cost of censorship resistance. For example, prominent developers like the aforementioned Martin Köppelmann are sounding the alarms that the percentage of OFAC compliant blocks needs to be fixed. It’s also nice to see debates about censorship resistance begin to take up more oxygen within the broader crypto community. I particularly enjoyed Erik Voorhees’ piece on the empowering nature of defi.

This is not to say that all crypto projects need to be censorship resistant; indeed censorship resistance itself exists on a spectrum. Yet it is vital that some crypto projects remain robustly censorship resistant. At, we are proud to offer tools like the Wallet, that anyone can use to self-custody their Bitcoin and other cryptocurrencies. As an industry, let’s take the events of the last year to remember how important censorship resistance is. Let’s not sacrifice this industry-defining attribute for short sighted gains.

What are your thoughts on this story? Let us know in the comments section below.

Mark Cuban: If I Were Sam Bankman-Fried, I’d Be Afraid of Going to Jail for a Long Time

The billionaire owner of the NBA team Dallas Mavericks and a Stark Tank star, Mark Cuban, says that if he were the former FTX CEO Sam Bankman-Fried, he would be afraid of going to jail for a long time. “I talked to the guy and thought he was smart … I had no idea he was going to take other people’s money and put it to his personal use,” Cuban said.

Mark Cuban on Sam Bankman-Fried and FTX’s Collapse

Mark Cuban, a Shark Tank star and the owner of the NBA team Dallas Mavericks, talked about the collapsed crypto exchange FTX and its former CEO Sam Bankman-Fried (SBF) in an interview with TMZ Sports, published Saturday.

Despite the FTX meltdown, Cuban still sees value in cryptocurrency. He opined:

There’s been a lot of people making a lot of mistakes, but it doesn’t change the underlying value.

FTX filed for Chapter 11 bankruptcy on Nov. 11 and Bankman-Fried stepped down as the CEO. The crypto exchange is currently being probed in several jurisdictions. In the U.S., several authorities, including the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), are investigating FTX for mishandling customer funds.

Regarding Bankman-Fried, Cuban stressed:

I don’t know all the details, but if I were him, I’d be afraid of going to jail for a long time … It sure sounds bad.

“I talked to the guy and thought he was smart,” the Shark Tank star added. However, he emphasized:

I had no idea he was going to take other people’s money and put it to his personal use.

Bankman-Fried has not been arrested and so far there seem to be no efforts by law enforcement to arrest him. Crypto influencer Bitboy recently flew to the Bahamas to get some answers. He spent the past couple of days camping outside Bankman-Fried’s condo in the Bahamas waiting for SBF to come out.

Cuban’s view of the FTX meltdown is drastically different from his Shark Tank co-star Kevin O’Leary who still insists that Bankman-Fried is one of the best traders in the crypto space and he would back the FTX co-founder again if he has another venture.

The Dallas Mavericks owner also recently explained that the FTX implosion is not a crypto blowup, but a banking blowup. “Lending to the wrong entity, misvaluations of collateral, arrogant arbitrages, followed by depositor runs … See long-term capital, savings & loan, and sub-prime blowups. All different versions of the same story,” he said.

In addition, Cuban emphasized that he invests in crypto because he believes “smart contracts will have a significant impact in creating valuable applications,” noting that “the value of a token is derived from the applications that run on its platform and the utility they create.”

What do you think about the comments by Mark Cuban? Let us know in the comments section below.

JPMorgan Expects Major Changes Coming to Crypto Industry and Regulation Post FTX Collapse

JPMorgan has outlined key changes it expects in the crypto industry and its regulation following the collapse of crypto exchange FTX. The global investment bank envisages several new regulatory initiatives, including those focusing on custody, customer asset protection, and transparency.

JPMorgan Expects Major Changes in Crypto Industry Post FTX Meltdown

Global investment bank JPMorgan published a report Thursday outlining major changes it expects to happen in the crypto industry following the collapse of cryptocurrency exchange FTX.

Global strategist Nikolaos Panigirtzoglou explained that “Not only has the collapse of FTX and its sister company Alameda Research created a cascade of crypto entity collapse and suspension of withdrawals,” but it is also “likely to increase investor and regulatory pressure on crypto entities to disclose more information about their balance sheets.”

Panigirtzoglou proceeded to list the main changes JPMorgan expects after the FTX meltdown. Firstly, he wrote:

Existing regulatory initiatives already underway are likely to be brought forward.

The JPMorgan strategist expects the European Union’s Markets in Crypto Assets (MiCA) bill to receive final approval before year-end and the regulation to take effect at some point in 2024.

As for the U.S., he explained that “regulatory initiatives attracted more interest following Terra’s collapse,” adding:

Our guess is that there would be even more urgency following the FTX collapse.

“A key debate among U.S. regulators centers around the classification of cryptocurrencies as either securities or commodities,” Panigirtzoglou continued.

The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has said that bitcoin is a commodity whereas most other crypto tokens are securities. However, several bills have been introduced in Congress to make the Commodity Futures Trading Commission (CFTC) the primary regulator of crypto assets.

JPMorgan also envisages:

New regulatory initiatives are likely to emerge focusing on custody and protection of customers’ digital assets as in the traditional financial system.

Noting that many retail crypto investors have already moved to self-custody their cryptocurrencies using hardware wallets, the strategist described: “The main beneficiaries post FTX collapse are institutional crypto custodians … Over time these trusted custodians will likely dominate over relatively smaller crypto-native custodians or crypto exchanges.”

Next, “New regulatory initiatives are likely to emerge focusing on unbundling of broker, trading, lending, clearing, and custody activities as in the traditional financial system,” the JPMorgan report adds, noting:

This unbundling will have most implications for exchanges which like FTX combined all these activities raising issues about customers’ asset protection, market manipulation, and conflicts of interest.

Furthermore, “New regulatory initiatives are likely to emerge focusing on transparency mandating regular reporting and auditing of reserves, assets, and liabilities across major crypto entities,” the JPMorgan strategist detailed.

Another major change identified by the investment bank is that “Crypto derivative markets will likely see a shift into regulated venues with CME emerging as a winner.”

Panigirtzoglou also discussed decentralized exchanges (DEX), noting that they face several hurdles until decentralized finance (defi) becomes mainstream. “For larger institutions, DEXs typically would not suffice for their larger orders due to slower transaction speed or their trading strategies and order size to be traceable on the blockchain,” the JPMorgan strategist opined.

Do you agree with JPMorgan’s analysis? Let us know in the comments section below.

Amid Civil Unrest in China, Gold and Silver Prices Hold Steady — Equity, Crypto Markets Flounder

Reports on Monday detail that the zero-Covid policy protests in China have lowered market sentiment as U.S. equity markets show the top four Wall Street indexes are struggling. The global crypto market cap is down 3.5% and getting awfully close to dropping below the $800 billion mark. Precious metal prices, on the other hand, like gold and silver have remained steady and since Nov. 3, an ounce of gold has jumped 7.06% higher in value against the U.S. dollar.

Gold and Silver Hold Steady Amid Turbulent Global Economy, Precious Metals Outpace Stocks and Crypto Assets

Financial markets on Monday have been shaky as far as stocks and cryptocurrencies are concerned. Precious metals like gold and silver, however, are holding steady amid the craziness in the world.

Some reports are citing Monday’s market shake-up to the civil unrest in China over the country’s zero-Covid policies. Indexes like the Dow Jones, Nasdaq, S&P 500, and NYSE have all opened the day in the red.

Additionally, the crypto economy is close to dropping below the $800 billion zone as bitcoin (BTC) is down over 2% during the last 24 hours. Ethereum (ETH) has shed 3.82% during the last day and the entire crypto economy has lost 3.5% against the greenback.

An ounce of gold is trading for $1,744 per ounce, which is up more than 7% against the U.S. dollar since Nov. 3. On that day, a troy ounce of fine gold was exchanging hands for 1,629 nominal U.S. dollars per unit.

Silver too has gained in USD value since that day as an ounce of fine silver was under $20 per unit on Nov. 3. Today, silver is exchanging hands for 20.99 nominal U.S. dollars per unit.

Silver’s rise since that day outpaced gold’s jump in value as silver increased by 7.91% during the last 25 days. While the world watches the events in China unravel, the U.S. employment report is due this Friday.

Additionally, the U.S. Federal Reserve’s chief Jerome Powell plans to discuss the U.S. economy this Wednesday. Reports indicate that some believe Powell will reveal plans to slow down interest rate hikes.

With gold doing so well amid the macroeconomic backdrop, some believe a ‘Santa rally’ could be in the cards. So far, during the last 25 days, both precious metals (Ag, Au) are doing better than stocks and crypto assets.

What do you think about the two precious metals’ market performances during the last month? Let us know what you think about this subject in the comments section below.

Crypto Lender Blockfi Files for Bankruptcy Protection to ‘Maximize Value for All Clients’

On Nov. 28, 2022, the crypto lender Blockfi informed the public via a press release that the company has voluntarily petitioned for Chapter 11 bankruptcy protection. Blockfi is now one of many digital currency businesses dealing with significant financial hardships and bankruptcy proceedings in 2022.

Blockfi Voluntarily Petitions for Chapter 11 Bankruptcy Protection

Blockfi has officially filed for bankruptcy protection according to a press release distributed on Monday morning at 10:17 a.m. (ET). The Chapter 11 bankruptcy filings encompass the crypto lender Blockfi and eight of its affiliates.

The crypto firm insists the plan is to “stabilize its business and provide the company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.” Blockfi has cited the FTX collapse as a period when the company took steps to protect Blockfi customers.

On Nov. 10, 2022, News reported that Blockfi had paused withdrawals and the firm also cited FTX in that specific announcement. Months prior it was assumed that FTX would be buying Blockfi as the company’s CEO said in July that the exchange had an “option to acquire” the crypto lender.

“With the collapse of FTX, the Blockfi management team and board of directors immediately took action to protect clients and the company,” the company’s financial advisor Mark Renzi detailed. “From inception, Blockfi has worked to positively shape the cryptocurrency industry and advance the sector. Blockfi looks forward to a transparent process that achieves the best outcome for all clients and other stakeholders.”

Compute North, Voyager Digital, Celsius, Three Arrows Capital, and FTX have all filed for bankruptcy protection after dealing with financial problems. Numerous problems are reportedly associated with over-leveraged assets and the Terra blockchain implosion that took place six months ago.

What do you think about Blockfi filing for Chapter 11 bankruptcy protection? Let us know what you think about this subject in the comments section below.