Earlier today, I came across a post on Reddit which talked about a crypto exchange being fined with $185 million by the Canadian authorities for concealing a crypto transaction taking place on the exchange. I found this news particularly ironic, as it shows just how far we have strayed from the original vision of crypto.
When Satoshi Nakamoto published Bitcoin in 2008, the idea was simple: A currency controlled not by governments, but by users, to enable them to transact privately. The core idea was based on anonymity and independence from the traditional monetary system.
As of today, crypto exchanges like any bank are being penalized for failing to report suspicious transactions to FINRA. The irony couldn't be more striking. These exchanges were supposed to be a way for people to gain financial freedom, but they have already taken on the characteristics of the institutions crypto was meant to replace.
Nowadays, trading crypto on regulated exchanges feels a lot like trading stock, or any fiat currency. Every transaction is monitored, recorded, and scrutinized. Users have to go through an elaborate KYC (Know Your Customer) procedure to verify their identity. Moreover, exchanges are obliged to notify the authorities if they find any suspicious activities. There is no option for anonymous crypto transactions in such regulated areas.
This shift didn't happened by accident. After crypto sudden rise to public prominence and substantial monetary value, various governments sought to be the drivers at the mainstream. The fine from Canada indicates that crypto exchanges are now regulated just like banks and other financial institutions.
The crypto world can basically be divided into two today - the regulatory compliant world of mainstream exchanges, and the truly decentralized world of p2p transactions which retains some of the initial vision of cryptos. Most mainstream exchanges make the usability of crypto similar to banking in their operations.
The evolution begs the question does crypto still have the potential to uphold its original promise of financial freedom and anonymity on a regulated basis? The Canadian fine shows that when crypto plays in the regulated sandbox, it must obey the same rules as everyone else. It may be time to accept that the average crypto is nothing but a regulated financial instrument monitored by the government and closely resembling traditional banking practices.
The real essence of crypto is found within the decentralized platforms and peer-to-peer transactions. However, for the average user who buys and sells it on major exchanges, crypto is no longer truly crypto as it has become exactly like any other regulated financial asset, only with a different name.