Crypto policy seminar brings together blockchain skeptics

Crypto policy seminar brings together blockchain skeptics

John Reed Stark helped launch the Securities and Exchange Commission’s Internet Enforcement Office in 1998, at the height of the internet boom.

Under the leadership of Stark, the bureau’s founding chief, the team had the task of cracking down on securities fraud being committed through the nascent but rapidly expanding web. The mission was to go after the bad guys with the same technology they were using – technology that Stark found fascinating.

“I was an internet evangelist,” he told Protocol. “I was talking there about how great the internet was and how limitless the possibilities were.”

More than 20 years later, Stark has spoken out against what he sees as a new wave of fraud. But this time he’s also targeting technology he says scammers use: cryptocurrencies and blockchain.

“There are many reasons to be skeptical about cryptocurrency,” Stark said. “I just feel like it’s really shameful.”

Stark has emerged as one of the most vocal critics of cryptocurrency and is a leading figure in the movement pushing for a more critical view of the industry and direction.

This loose network includes prominent technical experts, academics, journalists, and activists. One of them is prominent software engineer Stephen Dell, who was among the tech experts who in June sent a letter to US congressional leaders urging them to resist the hype saturated with cryptocurrencies.

On Monday, Stark will join The first major conference Network of crypto critics, including MP Brad Sherman, chair of the House Financial Services Subcommittee on Investor Protection, and Alex Sobel, Member of Parliament.

In an interview with Protocol, Stark discussed what crypto critics hope to achieve and why he decided to fight blockchain.

This interview has been edited for clarity and brevity.

How did the idea of ​​this conference arise for cryptocurrency critics?

Steven [Diehl] He began working on this thesis with a group of other extraordinary technologists. As soon as the message came out, there was such a momentum as the skepticism surrounding cryptocurrencies, DeFi, NFT, and all the other Web3 nonsense was extraordinarily multifaceted.

There are many aspects to it, whether you’re talking about bitcoin and the grand hoax theory, the externalities of ransomware, drug trafficking and human trafficking, the systemic financial risks of cryptocurrencies or the real, hype, and illogical hype. Belief in the blockchain. There are many reasons to be skeptical about cryptocurrency.

There are critics who are concerned about the way the crypto industry is developing, but they do not reject blockchain technology outright. I have a feeling this movement completely rejects these techniques.

Yes Yes Yes. It’s a wide way to put it. This works fine for me because the blockchain is the fundamental aspect of all of this. And as the techs explained in the letter, this is not the solution. [Blockchain technology] In general it makes things worse. not scale. It has all kinds of problems associated with it.

There was a Wendy commercial when I was growing up [which asked], “Where’s the meat?” I was the Head of the Internet Law Enforcement Office for 11 years. I’ve spent nearly my entire career at the SEC, which has been nearly 20 years, juxtaposing law, business, and technology.

I was a missionary on the Internet. I was there talking about how great the internet was and how endless the possibilities were. I actually helped install the first internet terminal at the Saudi Electricity Company headquarters. This was an incredible technique.

“The wave of crypto-crime is sweeping the world.”

Fast forward to today. [I asked] One such crypto enthusiast said, “Okay, tell me what, what are the benefits here?” It’s just incredibly ambitious, or it’s just a marketing ploy so that the IT person can get more funding. This is not the panacea that people portray.

Moreover, the implications of the blockchain technology used in cryptocurrencies, in NFTs, for decentralized finance – all of these things have caused chaos, not only in terms of ransomware, human trafficking, and drug trafficking. A wave of crypto crime is sweeping the world. Then there are the environmental issues associated with cryptocurrency mining.

What do you say to those who argue that cryptography is similar to the Internet, which also faced a lot of skepticism but eventually developed and thrived?

The first thing I always say is, “Tell me about using not just broad aspirational talk [like]Hey, this will make it instant when you buy your home. This will make it safer than ever when making a credit card transaction.

They just throw anything. They say it’s about financial inclusion, which is the worst of all – that it will solve the problem of the unbanked. This is how they connect people. So what I tell them is, “Tell me to use.” Don’t tell me this is here to stay, just because a lot of criminals started using it and a lot of venture capitalists got rich investing in it. Tell me why it’s worth it.

John Stark points to an office sign that says

John Stark helped launch the Securities and Exchange Commission’s Internet Enforcement Office in 1998.Photo courtesy John Stark

It does not work as a currency. Is there anyone using it? of course not. It’s way too volatile. What retailer will want to eat it one day, and the next is it worth a third of what it’s worth? Does not make sense.

And the idea that it is decentralized is a complete fraud. There are miners. There are digital wallets. There are platforms, exchanges. There are a lot of brokers. There is more and more every time you read about it.

Seven or eight years ago, I was ready to entertain the idea that this might be a thing someday. But I just finished it. Because there is a point in my research, my writing and my experience where I felt really shameful.

Gary Gensler is a major critic of cryptocurrency. But I’ve never heard him decry blockchain as a scam. In fact, in his 2018 lectures at MIT, he appeared to be open to potential innovation from crypto and blockchain technology.

I fully appreciate President Gensler’s position. If I go back to my original writing in 2017, 2018, and even 2020, I usually conclude by saying that blockchain may have the most incredible potential.

I’m not technical, although I’ve been interested in technology my whole life. I am not an engineer. So I was very careful.

“It doesn’t work as a currency. Is anyone using it? Of course not. It’s way too volatile.”

Then I started reading more and more techies and talking to more and more of them. I started collecting data, gathering information sources, watching lectures, and reading whatever I could do. I walked out one day a couple of years ago and said, “You know, blockchain is nonsense.”

I stand behind it, not as someone who makes this conclusion somewhat reflexive or without much study. Gensler was exactly where I was, at the same time he was studying. I think I would have said the same.

But you know, these are not early days. It shouldn’t be difficult for anyone to explain the benefits to me.

There are crypto industry leaders who recognize the need for regulation and are taking steps to create structures and systems for compliance requirements such as KYC. What do you think of these moves?

I think, first of all, the industry is collapsing. You can watch it with optimism because all these venture capitalists are pouring money into it. It’s a magic money machine. Tag Web3 anything and what do you get? An exponential evaluation of the enterprise.

Look at the NFT market. At first, I was like, “You want to buy some silly electronic animation with a link to a JPEG file and you want to pay a lot of money for it and help someone else make more money? Go.”

People want to be silly with their money, let them do it. But when you look at it, it has become a great industry, filled with a lot of fraud and deception. None of that makes any sense to me. It looked like a big money laundering machine.

Suddenly, to me, there’s been a lot of damage in this stuff, and the celebrities who promote it, to me, it sounds so horrible, so rude, that you’re going to take advantage of your fans so you can get a few more million. The conflicts of interest were incredible.

People talk about, “We need a new regulatory framework.” I do not see it. I see the current regulatory framework. Keep saying how wonderful it is that everything is going [but] We need regulatory clarity. We just want to do this right. There is absolutely no transparency in any of these entities. And you can’t have a financial system without this kind of transparency. It is not safe.

I’m not a big laws guy. But when it comes to finance, it’s not an area where you can let people run free.

You argue that the industry is collapsing. But it is hard to imagine the disappearance of cryptocurrencies and the blockchain.

As you know, this is a very good point. Like, what are we going to do with this industry? It is here to stay. All I can tell you is how bad it is.

What do you hope to achieve this conference?

The idea is to bring some sunlight into all these many misrepresentations and fallacies of Web3, Crypto, Bitcoin, DeFi, NFTs – all of it. And focus on all the issues that make these products not a good thing.

We are all just a jumble of experts from different fields who will come together to talk, through their lens, about why they believe what they believe.

None of us will make any money by what we say at this conference. Maybe someone is making money somehow, I don’t know. But I know that waking up in the morning to a bunch of hate and vitriol on Twitter isn’t necessarily the right path toward business development and profit. There is no anti-crypto factory that you can work with.

From my point of view, I think the beauty of this conference is that it is the first in history to actually present these experts who will come together for the first time in a way that advances every angle. Because it is a multifaceted situation. There are hundreds of cryptocurrency conferences, and they are all lovable where everyone sits down and talks about how awesome they are, because they are all getting richer from them.

I don’t mean to sound sarcastic, but it is the truth. this is the truth. So it’s kind of an antidote to this disease, which is now afflicting space.

Can you talk about your role in setting up an online law enforcement office?

This was a long time ago. I have always been very interested in technology. I just started doing a lot of technology related issues and have developed a name for myself in the enforcement department as someone to go to if you have any kind of technology related issues. I have written the first set of guidelines for electronic investigations.

The explosion began. More and more cases touched the Internet. There were a lot of investigation cases, a lot of prosecution cases. I wrote a technical document that we should just create a dedicated online office [issues] That will help with surveillance, education, communication and prosecution. We set up the first online enforcement complaint center. We have set up an email box called I opened that email box every morning and read each one and figured out what to do with each one.

I had this wonderful director, Dick Walker, who was very tech-savvy per se, and said, “Let’s make an office.”

They set up an online law enforcement office, and it ended up growing. We kept doing more and more. We had different experts – brokers registration experts, dealers and tax experts. We had technology experts. We also had people who are savvy in law enforcement.

I have a picture of myself pointing to the sign outside my office, which reads, “John Reed Stark, Chief of the Internet Law Enforcement Office.” You can see I’m very excited, like a little kid.

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