America Is An “Aging Empire” and Is Falling Behind on Crypto
BeInCrypto spoke exclusively to Omid Malekan, a professor at Columbia Business School and the author of Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms.
Omid Malekan first discovered Bitcoin in 2013, after a friend asked him to purchase some on the friend’s behalf. “Prior to that, I had no interest. My impression of Bitcoin was, like a lot of people back then, that it’s just some weird internet thing that appeals to drug dealers,” said Malekan. However, actually interacting with Bitcoin quickly changed his mind. His “epiphany” came when the cryptocurrency exchange Mt. Gox was hacked in 2014.
At the time, it was the largest exchange of its kind in the world, handling over 70% of all Bitcoin transactions worldwide. It was the notion of digital scarcity that triggered the revelation. “For the first time in the history of the internet, something valuable was stolen, and it could not be replaced. And that wasn’t possible before Bitcoin. It was this epiphany that sent me down the rabbit hole. That’s turned into an entire career.”
Fast forward a decade later, and Malekan teaches students about crypto at Columbia Business School. Possibly, the world’s most prestigious business school after Harvard. He has also authored several books on the subject. The latest is Re-Architecting Trust: The Curse of History and the Crypto Cure for Money, Markets, and Platforms.
The Aging Empire
As an American, Malekan has had a front-row seat watching the US turn against crypto. Operating a crypto business, or even trading in cryptocurrency, in the country is becoming harder. Banking regulators have increasingly tried to drive crypto out of the financial system. The law firm Cooper & Kirk has described this as “Operation Chokepoint 2.0.” (The original Operation Choke Point was an initiative launched by the Department of Justice in 2013 to investigate banks doing business with high-risk companies such as payday lenders, firearms dealers, and online gambling sites. Critics argued it unfairly targeted legitimate businesses and limited access to credit. The Trump administration ended the operation in 2017.)
Gary Gensler’s tenure as chair of the SEC has been marked by an anti-crypto attitude. The Biden White House now sees crypto as more of a threat than an opportunity.
Malekan described the attitude of the US Government as ill-informed. “It is counterproductive,” he said. “I’m almost embarrassed to say that America is now acting like an aging empire that just feels threatened by a new kind of financial system. And instead of trying to figure out how to evolve to embrace it, there is this hubris within these regulatory circles that, well, we’re just going to stop it. We will deal with crypto on our terms… using very antiquated laws.”
“Ultimately, this technology will go mainstream because it solves important problems,” explained Malekan. “It is also extremely global, and it is borderless, so if it doesn’t find a home in America, it will find a home elsewhere. And that means that a lot of the jobs and tax revenues will now accrue to countries beyond the US.”
A Solution In Search of a Problem?
One of the most common criticisms of cryptocurrency and blockchain is that they are a “solution in search of a problem.” Many of the world’s most-quoted financial and technical minds have criticized the technology, including Bill Gates and economist Paul Krugman. Warren Buffet has called crypto “rat poison squared” and said, “they will come to a bad ending.”
How does Malekan answer the claim that crypto doesn’t solve any real problems?
“I can spend hours talking about this,” he said. “Whenever you hear someone make that claim—and I have heard it too—almost universally, it is an affluent elite living in the highly developed world. It’s usually someone like a professor or a banker in a place like New York or London. It is very telling when they say things like, well, we don’t need blockchain or crypto because we have credit cards. Apparently, it does not occur to these people that the vast majority of humans on the planet do not have a credit card. Merchants and businesses would love to find an alternative to credit cards because of the fees they’re forced to pay. Even in places such as New York.”
That dismissive attitude is an insult to the millions who use crypto, he said. “To say that is to say that they’re all idiots and have no idea what they’re doing.”
“If we want to break it down to specifics, there are many people who have used Bitcoin as a way to protect their purchasing power from very high inflation. There are also many artists who have found that NFTs give them new ways to earn a living and interact with their fans. There are companies that have started using things like stablecoins to make more efficient cross-border payments. And the list goes on and on and on.”
Malekan has plenty of caveats about crypto, too, notably the “speculative excess.” But, most of all, he hates “the tendency to rally behind these prophets and outspoken leaders who then turn out to be criminals and psychopaths like Sam-Bankman-Fried.” It’s “a very crypto thing.”
The crypto community also has a tendency to treat its favorite coins like football teams. Constantly jostling with each other to prove that their project is the best.
“I think sometimes they act like they’re actually religious movements,” Malekan said. “They have their profits, and then they excommunicate those within the movement who dare question whatever the fundamentalist view is.”
“I’m always amazed when I meet people who really believe that one project and one coin and dismiss every other one out there. To me, that’s preposterous. There’s never been a technology that only has one exact application.”
“Money has always lent itself to these kinds of tribalistic passions. And then beyond that, unfortunately, this is the world we live in on social media and polarization and tribalism of everything.”
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