Letter in Support of Responsible Fintech Policy
June 1, 2022
The Honorable Charles E. Schumer
Majority Leader
U.S. Senate
Washington, DC 20510
The Honorable Mitch McConnell
Minority Leader
U.S. Senate
Washington, DC 20510
The Honorable Nancy Pelosi
Speaker
U.S. House of Representatives
Washington, D.C. 20510
The Honorable Kevin McCarthy
Minority Leader
U.S. House of Representatives
Washington, D.C. 20510
The Honorable Debbie Stabenow
Chairwoman
Senate Committee on Agriculture, Nutrition and Forestry
U.S. Senate
Washington, D.C. 20510
The Honorable John Boozman
Ranking Member
Senate Committee on Agriculture, Nutrition and Forestry
U.S. Senate
Washington, D.C. 20510
The Honorable Sherrod Brown
Chairman
Senate Committee on Banking, Housing and Urban Affairs
U.S. Senate
Washington, D.C. 20510
The Honorable Patrick J. Toomey
Ranking Member
Senate Committee on Banking, Housing and Urban Affairs
U.S. Senate
Washington, D.C. 2051
The Honorable Ron Wyden
Chairman
Senate Committee on Finance
U.S. Senate
Washington, D.C. 20510
The Honorable Mike Crapo
Ranking Member
Senate Committee on Finance
U.S. Senate
Washington, D.C. 20510
The Honorable Maxine Waters
Chairwoman
House Financial Services Committee
U.S. House of Representatives
Washington, D.C. 20510
The Honorable Patrick McHenry
Ranking Member
House Financial Services Committee
U.S. House of Representatives
Washington, D.C. 20510
Dear U.S. Congressional Leadership, Committee Chairs and Ranking Members,
We are 1500 computer scientists, software engineers, and technologists who have spent decades working in these fields producing innovative and effective products for a variety of applications in the fields of database technology, open-source software, cryptography, and financial technology applications.
Today, we write to you urging you to take a critical, skeptical approach toward industry claims that crypto-assets (sometimes called cryptocurrencies, crypto tokens, or web3) are an innovative technology that is unreservedly good. We urge you to resist pressure from digital asset industry financiers, lobbyists, and boosters to create a regulatory safe haven for these risky, flawed, and unproven digital financial instruments and to instead take an approach that protects the public interest and ensures technology is deployed in genuine service to the needs of ordinary citizens.
We strongly disagree with the narrative—peddled by those with a financial stake in the crypto-asset industry—that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans.
Not all innovation is unqualifiedly good; not everything that we can build should be built. The history of technology is full of dead ends, false starts, and wrong turns. Append-only digital ledgers are not a new innovation. They have been known and used since 1980 for rather limited functions.
As software engineers and technologists with deep expertise in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.
By its very design, blockchain technology is poorly suited for just about every purpose currently touted as a present or potential source of public benefit. From its inception, this technology has been a solution in search of a problem and has now latched onto concepts such as financial inclusion and data transparency to justify its existence, despite far better solutions to these issues already in use. Despite more than thirteen years of development, it has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions and are not an improvement on existing non-blockchain solutions.
Finally, blockchain technologies facilitate few, if any, real-economy uses. On the other hand, the underlying crypto-assets have been the vehicle for unsound and highly volatile speculative investment schemes that are being actively promoted to retail investors who may be unable to understand their nature and risk. Other significant externalities include threats to national security through money laundering and ransomware attacks, financial stability risks from high price volatility, speculation and susceptibility to run risk, massive climate emissions from the proof-of-work technology utilized by some of the most widely traded crypto-assets, and investor risk from large scale scams and other criminal financial activity.
We implore you to take a truly responsible approach to technological innovation and ensure that individuals in the US and elsewhere are not left vulnerable to predatory finance, fraud, and systemic economic risks in the name of technological potential which does not exist.
The catastrophes and externalities related to blockchain technologies and crypto-asset investments are neither isolated nor are they growing pains of a nascent technology. They are the inevitable outcomes of a technology that is not built for purpose and will remain forever unsuitable as a foundation for large-scale economic activity.
Given these vast externalities, together with the—at best still-ambiguous and at worst non-existent—uses of blockchain, we recommend that the Committee look beyond the hype and bluster of the crypto industry and understand not only its inherent flaws and extraordinary defects but also the litany of technological fallacies it is built upon.
We need to act now to protect investors and the global financial marketplace from the severe risks posed by crypto-assets and must not be distracted by technical obfuscations which mask an abject lack of technological utility. We thank you for your leadership on financial technology and regulation and urge you to consider our objective and independent expert judgments to guide your legislative priorities, which we remain happy to discuss anytime.
Lead Signatories
Affiliations are provided for identification purposes only. This letter expresses the views of the individual signatories, and should not be taken to be an official position of the institutions.| Sal Bayat | Tim Bray | Grady Booch ACM Fellow, IEEE Fellow, IBM Fellow | Brennan Carley Proton Advisors | Stephen Diehl | David Gerard |
| Jürgen Geuter | Alan Graham OCL | Geoffrey Huntley | Miguel de Icaza | Patrick McConnell Macquarie University | Luke Plant Django Software Foundation |
| Rufus Pollock Open Knowledge Foundation | Matt Ranger | Jorge Stolfi University of Campinas | Steve Song Network Startup Resource Center | Bruce Schneier | Dave Troy 410 Labs Inc. |
| Darren W. Tseng | Štefan Urbánek Open Knowledge Foundation | Nicholas Weaver International Computer Science Institute | Adam Wespiser SimSpace Corporation | Molly White |
Jamie Zawinski
Netscape Developer |
External Writing and Research
The resources offered here were chosen by the authors of this letter as useful reference material only. The inclusion of a paper and/or author in this list does not constitute an endorsement of this letter of our views.Allen, Hilary J. 2022. 'DeFi: Shadow Banking 2.0?' SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4038788.
Allen, Hilary. 2022. Driverless Finance. Oxford University Press.
Chancellor, Edward. 1999. 'Devil Take the Hindmost: A History of Financial Speculation'.
Dhawan, Anirudh, and Tālis J Putniņš. 2020. 'A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets'. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3670714.
Dywer, Gerald P. 1996. 'Wildcat Banking, Banking Panics, and Free Banking in the United States', 20.
Chipolina, Scott. 2022. 'The Week That Shook Crypto'. Financial Times, 13 May 2022, https://www.ft.com/content/3e0a65bb-a953-433a-819e-ff29de847336.
Foley, Sean, Jonathan R Karlsen, and Tālis J Putniņš. 2019. 'Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?' The Review of Financial Studies 32 (5): 1798-1853.
Gorton, Gary B., and Jeffery Zhang. 2021. 'Taming Wildcat Stablecoins'. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3888752.
Hamrick, JT, Farhang Rouhi, Arghya Mukherjee, Amir Feder, Neil Gandal, Tyler Moore, and Marie Vasek. 2018. 'An Examination of the Cryptocurrency Pump and Dump Ecosystem'. http://ssrn.com/paper=3303365.
Hanley, Brian P. 2018. 'The False Premises and Promises of Bitcoin'. ArXiv:1312.2048 [Cs, q-Fin], July. http://arxiv.org/abs/1312.2048.
Hockett, Robert C. 2019. 'Money's Past Is Fintech's Future: Wildcat Crypto, the Digital Dollar, and Citizen Central Banking'.
Kindleberger, Charles P, Panics Manias, and A Crashes. 1996. 'History of Financial Crises'. Wiley, New York.
Kelly, Jemima. 2021. 'Why We Shouldn't Listen to Crypto "Experts"'. Financial Times, 23 June 2021. https://www.ft.com/content/26283f09-c3df-4c7e-814c-65083b063d8a.
Mehrotra, Kartikay. 2020. 'UCSF Hack Shows Evolving Risks of Ransomware in the Covid Era'. Bloomberg.Com. Bloomberg. https://www.bloomberg.com/news/features/2020-08-19/ucsf-hack-shows-evolving-risks-of-ransomware-in-the-covid-era.
Mims, Christopher. 2022. 'NFTs, Cryptocurrencies and Web3 Are Multilevel Marketing Schemes for a New Generation - WSJ'. Wall Street Journal. 19 February 2022. https://www.wsj.com/articles/nfts-cryptocurrencies-and-web3-are-multilevel-marketing-schemes-for-a-new-generation-11645246824".
Orcutt, Mike. 2020. 'This Is How North Korea Uses Cutting-Edge Crypto Money Laundering to Steal Millions'. MIT Technology Review. MIT Technology Review. http://www.technologyreview.com/2020/03/05/916688/north-korean-hackers-cryptocurrency-money-laundering/
Popper, Nathaniel. 2020. 'Ransomware Attacks Grow, Crippling Cities and Businesses'. New York Times, February.
Schneier, Bruce. 2019. 'There's No Good Reason to Trust Blockchain Technology'. Wired Magazine. https://www.wired.com/story/theres-no-good-reason-to-trust-blockchain-technology/
Shiller, Robert J. 2017. 'What Is Bitcoin Really Worth? Don't Even Ask.' The New York Times, 15 December 2017, sec. Business. https://www.nytimes.com/2017/12/15/business/bitcoin-investing.html
Steele, Graham. 2021. 'The Miner of Last Resort: Digital Currency, Shadow Money and the Role of the Central Bank'. Technology and Government, Emerald Studies in Media and Communications, Forthcoming.
Taleb, Nassim Nicholas. 2021. 'Bitcoin, Currencies, and Fragility'. ArXiv:2106.14204 [Physics, q-Fin], July. http://arxiv.org/abs/2106.14204
Rosenthal, David. n.d. 'Stanford Lecture on Cryptocurrency'. Accessed 2 March 2022. https://blog.dshr.org/2022/02/ee380-talk.html .
Vries, Alex de. 2018. 'Bitcoin's Growing Energy Problem'. Joule 2 (5): 801-5. https://doi.org/10.1016/j.joule.2018.04.016.
———. 2020. 'Bitcoin's Energy Consumption Is Underestimated: A Market Dynamics Approach'. Energy Research & Social Science 70: 101721.
Vries, Alex de, and Christian Stoll. 2021. 'Bitcoin's Growing e-Waste Problem'. Resources, Conservation and Recycling 175 (September): 105901. https://doi.org/10.1016/j.resconrec.2021.105901.
Walch, Angela. 2019. 'Deconstructing 'Decentralization': Exploring the Core Claim of Crypto Systems'. C. Brummer (Ed.), Crypto Assets: Legal and Monetary Perspectives, 1-36. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244
Weaver, Nicholas. 2018. 'Risks of Cryptocurrencies'. Communications of the ACM 61 (6): 20-24.
White, Molly. 2022. 'Abuse and Harassment on the Blockchain'. Molly White. 22 January 2022. https://blog.mollywhite.net/abuse-and-harassment-on-the-blockchain/.
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