While the freezes were bad news for bitcoin investors who are already suffering an historic downturn, they also expose a contradiction at the heart of the cryptocurrency world.
Despite all the industry’s promises to decentralize finance, those who have traded their money for crypto have done little more than choose one financial gatekeeper over the rest.
Binance and Celsius customers’ savings were no longer free to be in Bitcoin. They were still subject to the whims of an intermediary who had the power to close its doors and cut off users, just like a bank.
The main difference is that there is no regulation to protect deposits if a cryptocurrency company goes bust.
Yes, Bitcoin technically operates independently of any institution or country and is governed only by computer code and the network of “miners” that maintain it. For this reason, strictly speaking, it can never be regulated. You can download your bitcoin to a hard drive and actually own it.
But most people don’t do it: it’s not worth the effort or the risk. Instead, they store their cryptocurrencies on an online exchange where they can be easily withdrawn and liquidated.
Convenience triumphs over idealism, and as the recent number of monopolies in Silicon Valley has shown, consumers are drifting toward centralization.
Once on an exchange where it can be converted, Bitcoin must interact with the rest of the financial system, making it subject to regulation.
Coinbase, one of the largest exchanges in the world, processes hundreds of law enforcement requests every week. Those operating in the UK are regulated by the Financial Conduct Authority. Criminals are finding it increasingly difficult to turn stolen cryptos into cash, as they are often confiscated if they get on an exchange.
As cryptocurrency companies come under closer scrutiny, they will look less representative of the libertarian ideal on which Bitcoin was founded and more like the aging banks it was intended to replace.
At this point, we might wonder where its value comes from. When a few companies have the power to crash the entire market, Bitcoin doesn’t look so free after all.
https://www.telegraph.co.uk/business/2022/06/15/crypto-crash-proves-bitcoins-libertarian-dream/ The crypto crash proves it – Bitcoin’s libertarian dream is over