Shapeshift founder and former Bitcoin lawyer Erik Voorhees believes that decentralized finance (DeFi) has already solved the problem of regulatory clarity preventing people from owning or trading a majority of cryptocurrencies.
The crypto industry is concerned that all but the four cryptocurrencies listed on the newly launched EDX markets – BTC, ETH LTC and BCH – could potentially be banned from trading in the US.
The industry is concerned that EDX’s listing is an echo of regulatory sentiment and a precursor to the demarcation between these four and all other cryptocurrencies in terms of the latter as securities.
Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are the only four cryptocurrencies that regulators have publicly admitted are not securities. Meanwhile, SEC Chairman Gary Gensler has repeatedly stated that all other cryptocurrencies are considered securities in all respects by the regulator.
EDX is backed by longtime financial giants like Citadel Securities, further fueling fears that Americans will only be able to trade these four cryptocurrencies on exchanges that Wall Street controls due to regulatory restrictions.
The four tokens listed on the exchange have gained tremendous interest in the following days, with BCH and Litecoin making impressive gains.
DeFi is the solution
Many have urged the industry to come together and make a concerted effort to ensure that altcoins are not left behind in the US.
However, Voorhees said this is a problem that already has a solution in the form of DeFi.
Voorhees said DeFi is inherently “permissionless,” meaning if people want to trade and own altcoins that aren’t on centralized exchanges, they can turn to decentralized protocols.
DeFi protocols do not require legal clarity or permission to operate and there is very little governments can do to intervene beyond making DeFi related transactions illegal.
According to Voorhees:
“She [governments] can write any law they want. Either way, the protocols will continue to work… That is extremely powerful.”
Bitcoin on-off disaster
One of the major shortcomings of DeFi protocols is the lack of a fiat-on-off ramp in traditional banks, which means altcoins without a fiat connection cannot be used in everyday transactions such as buying groceries.
Most people get around this problem by using centralized exchanges with such ramps or a peer-to-peer marketplace where supported cryptocurrencies can be exchanged.
Compared to DeFi, listings are limited on centralized exchanges like Coinbase and even Binance. The crypto industry is concerned that these choices could be further narrowed down to just four cryptocurrencies.
However, Voorhees believes this would not be a problem and would not hinder DeFi protocols or altcoins. He said the industry only needs one “single ramp to banking” to function and Bitcoin could easily fill this role.
People already convert unlisted cryptocurrencies into Bitcoin, Ethereum and stablecoins when they intend to cash out for fiat and this practice would be maintained, albeit in a more limited way, in the US.
Voorhees’ arguments go back to the basics of why Bitcoin and DeFi were created in the first place: to give people economic choice.
