Lately, with the fall of FTX and a series of collapse from blockchain firms, skepticisms are coming out on all medias to blast cryptocurrency as a scam or illegal things. For example, I recently heard a guest on Bloomberg today, whom name shall not be mentioned, even suggested that we do not need to differentiate between blockchain and FTX, aka a cryptocurrency and a company. It is bizarre that some of these doubters don't event put effort in forging a good arguement but just blantly bias opinion. In this article, I shall debunk his points since I saw it appears many time in other cryptocurrency doubters.
Let's start with the argument that bitcoin and other cryptocurrencies are being used for ransomware and therefore it should be banned. This is fundamentally wrong, as I have to remind basic math here that you cannot take a subset of an entire thing and label it based on that (figure 1). Furthermore, it is critical to remember that all these criminal activities (ransomware, abduction, money laundering, etc) already exists before bitcoin is borned. USD or other forms of payments like art were used for transaction these things. Does it make sense to say USD is used for these payments, so we should ban USD?
Figure 1: Subset (Source: Wikipedia)
Secondly, critics argue that since cryptocurrencies do not generate cash flow, their valuation is fundamentally flawed. To address this argument, it is essential to understand two points:
a) Cryptocurrencies are not companies. Like gold, diamonds, or art, their value is based on the collective perception of their worth.
b) Although widespread adoption of cryptocurrencies has yet to occur, their current valuation may be based on future prospects or historical significance. It is still unclear how to accurately price cryptocurrencies in this context..
Finally, the guest on Bloomberg said people should pay capital gain or tax when transacting with cryptocurrency. It is funny as the host immediately snap him back that the host bought bitcoin at 800USD and used it at 600USD, implying that there actually could be a tax loss harvesting instead of a capital gain tax. The guest immediately became 'whatever I do not care', then diverted to the scam and ransomware issue I mentioned above. This demonstrates that there is indeed a need for more comprehensive regulation in the cryptocurrency and blockchain sectors. As regulators often struggle to keep up with technological innovation, it is crucial to address the current gaps in regulation to protect the interests of everyday investors
While decentralization is a core tenet of cryptocurrency and blockchain technology, it is essential to strike a balance between complete decentralization and the need for regulation to protect investors. The downfall of FTX was not due to centralization, but rather mismanagement and fraudulent actions by its leaders. By understanding and debunking these misconceptions, we can engage in a more informed and balanced discussion about the future of cryptocurrencies and blockchain technology.
If you want to expand the argument about banning cryptocurrency, you might be interest in this newer article. If you want to learn more about FTX downfall, you can read more here.
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