The debate about the regulation of the crypto markets continues to heat up as Sam Bankman-Fried received widespread criticism for his proposal.
Last week, SBF shared an “industry norms manual” in which he proposed enforcing regulation on decentralized finance protocols via their front ends. Additionally, in the post, SBF was very keen to comply with OFAC (Office of Foreign Assets Control), the financial intelligence and enforcement agency of the US Treasury Department which sanctioned Tornado Cash in August.
The crypto community strongly criticized SBF’s take, arguing that this regulatory proposal would harm DeFi. Among many who posted their concerns, one stood out. Erik Voorhees, founder and CEO of ShapeShift, posted a long rebuttal in which he opined, among other things, that if crypto submits to OFAC sanctions, it would go on a “path to tyranny.” Vorhees urged Bankman-Fried: “Reconsider your fidelity to OFAC.”
In addition, Voorhees pointed out that it’s a mistake to consider decentralized platforms like Uniswap as intermediaries in the sense of traditional finance, and thus should not be regulated as such.
The debate then moved to Twitter, in which Bankman-Fried and Voorhees laid out more arguments, with the former saying that his proposal is “better than the status quo and better than we’re likely to get.”
On the topic of the regulation of DeFi websites, Michael Bentley, cofounder of Euler Finance, disagreed with SBF who is “throwing front end hosts under the bus.” On the same lines, Twitter user Makesy said: “Throwing [front ends] under the bus is a massive and irreversible mistake for the development of the tech in the US.”
While SBF said that the line to define whether something constitutes a broker “is not clear,” others disagreed. Gabriel Shapiro, general counsel at Delphi Labs argued that “mere websites must not be regulated broker/dealers.”
Cofounder of Element Finance Jonny Ray wrote: “the line seems clear. If you custody your user’s funds and the activity isn’t transparent on chain-> broker. Otherwise -> not broker.”
Twitter user señor doggo warned about the implications of SBF’s proposal, specially for developers. “If you don’t think this is a big deal, would you like to KYC to use Etherscan? Because that’s exactly what he’s advocating for,” he wrote.