Defi, defi, defi.
The news is that Blockfi is getting smacked around in its home state of New Jersey, and other states are getting in on the grift. Alabama of Forrest Gump fame is trying to say that Blockfi is dealing in unregulated securities, which is just another way of saying "pay us bribes to do business with our sla...er...citizens."
Companies like Blockfi ran towards regulators begging to be regulated so they could market themselves to you as the safest crypto investment option. They paid so-called bitcoin maxis like Anthony Pompliano (who should be ashamed of himself) to shill the product as the preferred method for monetizing your bitcoin. Instead of paying you the 3-digit APYs they're taking advantage of, they give you 6% on your BTC. And the government is coming for that shitti ass return.
I've said it before; I'll say it again: Government cannot tax your crypto. They tax your citizenship. As it stands today, money on the blockchain is beyond the scope of an any government to tax. If you know what you're doing, you can legitimately hide your stash just like you had a 30-foot hole in the desert for bars of gold. The government is counting on you not knowing what you're doing, and the companies working with them have a vested interest in keeping you from the best investment opportunities.
In return for your ignorance, you get an exponentially lower return. But not only that, you get the shit beat out of your shitti return. New Jersey and Alabama will get their pound of flesh from Blockfi, Gemini, and all of the other "safe" crypto companies out there. When Blockfi, Gemini, and those other "safe" companies start paying their bribes, you can bet they'll take it out of your interest rate. And pretty soon, that 6% will be whittled down to little more than you're getting from your bank right now. But your crypto will be safe.
See, if the government ever decides that crypto is a threat to its sovereign currency, it may respond by confiscation. They can't confiscate the blockchain, however. So any money that's not in centralized entities will be safe as things stand today. The only money that is in trouble is the money in Blockfi, Gemini, and all of these other "safe" crypto companies out there. Why? Because the government will be taxing the "citizenship" of those companies in lieu of taxing crypto in whole. Even Binance, a crypto country without a physical jurisdiction, is bending the knee to regulators around the world. Please somebody explain this to me — if Binance is going to back off whenever a regulator cries, why not just go all the way to be fully regulated? I don't get it.
You can bet the US government will attempt to silo the crypto in this walled garden. This is what I see happening:
Blockfi, Gemini, et al. will slowly but surely become the financial arms of the government. Citizens in Western countries will be required to use these exchanges in order to fully participate in Western economies. That is, you won't be able to buy shit from Apple from a non-custodial wallet inside the United States. And forget all those digital mom-and-pops using AWS. They'll be required to accept crypto only from fully regulated entities. Western governments will attempt to destroy the fungibility of cryptos like bitcoin, marking good and bad bitcoin based on how KYC'd it is. You may not even be able to withdraw your crypto from these exchanges. Paypal already made this happen. When it's made law, sheeple won't fight it for long.
Smart money and rich people will diversity outside of this system and move their investment outside of Western economies, as they always do. (Emerging markets has been the best investment in the world for quite some time anyway, regardless of crypto.) And no, the US won't be able to control what goes on outside of its borders in crypto. The dollar will lose power around the world. Rising economies will choose their preferred crypto like Venezuela did with Dash, El Salvador did with bitcoin, the Philippines did with SLP and AXS, etc., etc., and the world's economy will section itself into walled gardens. But the US and its allies will set its walls a bit too high and cut themselves off from the rest of the world.
And who will be the biggest losers in this scenario? Dumb, lazy Western investors who are stuck on Blockfi and Gemini. Those 6-9% interest fixed interest rates are shit anyway, and they'll get a haircut as those companies pay off regulators and leave you with the bill. More importantly, Westerners will have their wealth stuck in a shrinking Western economy while the rest of the world invites innovation and expansion. Income inequality in the West will increase. The vast majority of Western citizens will miss out on the huge gains of crypto and get fooled into thinking that 0.5% on BTC is something awesome. In the meantime, defi investors will be making out like bandits with 100%, 200%, 450% APR investing in early stage companies, grabbing airdrops, and building decentralized investment platforms to connect across continents.
Get ahead of the curve and learn defi so you don't get caught up in this nonsense. The safe companies are giving the lowest interest rates and getting regulated the most. Regulators in the West are greedy. They aren't regulating for your protection. They're trying desperately to stay relevant in a structure that doesn't need them whatsoever. Smart contracts by definition make regulators irrelevant.
If you hate my guts and don't like my defi stuff, I actually don't care who you read. The more people who get into defi and away from Blockfi, the better we all do. And the genius of it — you don't have to like me for us both to cooperate and make bank. The more liquid defi gets, the more stable the virtuous cycle of decentralized money lending, borrowing, transference, and investment becomes. I don't have to like the projects you're in or even be on the same blockchain as you. Defi naturally creates a stronger, not lesser, system as it gets more robust.
But if you're too lazy to learn defi, honestly, the 6% or 9% or whatever you get on Blockfi isn't worth the political risk you're taking. On the basis of some backdoor national security policy, you can get your crypto snatched by the government in a snap — just like they did with gold a generation earlier. You're better off just holding your bitcoin in a cold storage wallet and waiting until you want to sell it for some other asset. Suum cuique.
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