Cryptocurrency is the antithesis of sovereignty. The philosophy of decentralization, which inherently opposes formations of corporations and their subsequent monopolic activities, is embedded deep in its foundation and in its mechanics of operation. The ground is level for everyone involved, certainly a remarkable step-up from the traditional financial sector. But a new phenomenon of non-consequence has bolstered itself concerning the establishment of exchanges.
Of late, we've seen many prominent exchanges and savings accounts that have been around for quite a while collapse under their own pressure. Whether it be through insolvency as a result of sharp declines in price, overloaning beyond capacity or plain corruption behind closed curtains, those exchanges have suffered little legal repercussion for their actions. No legal entity yet exists to hold them accountable.
But Why?
The answer as to why is manifold, but it can be postured as such: The legal landscape surrounding the trade of, and establishment of businesses around, cryptocurrency as a whole is largely uncertain. The only legal entity out there that has any say in the internal affairs of exchanges is the SEC, but even then it's an offshoot of what their objectives are in regulating finances. The lawsuit they thought they could win against XRP has quickly turned against them, as remarkable as that is to happen, partly because they are dumbfounded as to how to navigate such an extraordinary case, the likes of which the courts have never experienced before. With the SEC struggling to latch onto any string, XRP is in the damn clear.
Once the regulations pick up their slack, however, is when I predict the SEC is going to be much more confident in entering the field as a regulatory body, and a lawsuit powerhouse. By all means, this lawsuit against XRP we all thought was a last-ditch effort could be to scout the capabilities of the current legal frame concerning cryptocurrencies. The ideological rift of regulation vs. non-regulation is about to widen as the SEC dips its entire leg down the rabbit-hole of crypto once they construct much more resounding legal pathways.
Until that happens, exchanges right now are leveraging that uncertainty, registering themselves as legitimate businesses on the side of the legacy system, whilst their operations are completely illegitimate in the realm of cryptocurrency. From thereon, coasting off for as long as you can is the name of the game, until everything implodes. There is no incentive to keep the books consistent. There is no incentive to keep from pocketing users' funds. There is no incentive to prevent something like Celsius, BlockFi and FTX from happening all over again.
I know regulation is the mortal enemy of cryptocurrency, but regulation doesn't just simply manage the bank-client interface. It's what under the hood that the regulations are trying to keep from exploding. Banks in the legacy system stay in business for decades because they are at a constant threat of scrutiny. Regulations in the sense of accountability is what is needed in our the space of cryptocurrency ventures.
Could the Users be Held Accountable?
Of course! The ineptitude of the typical cryptocurrency user is largely to blame for the enrichment and enablement of those exchanges going under. Hey, not your keys not your crypto, right?
But you can't expect the inconvenience of using a legitimate wallet with a private key to NOT get in the way of the prevalent, in-your-face common sense of that "not your keys, not your crypto" sentiment, right? The convenience of having a traditional username-password interface, the UI that keeps you fed with moment-to-moment price changes, trading options, charts with big BUY and SELL buttons under your thumb, it's simply too much to those users to give up and go the way of using Electrum. Those people betrayed the crypto rhetoric. You could argue that those people are in it for the profit, not for the tech, and that they deserved what was coming to them. But you'd be surprised how many people are in it for the latter, yet still fall for the same basic mistakes.
The truth of the matter is that the bulk of the crypto user space are swing traders, those that hold no knowledge as to how to properly interact with the blockchain, yet still want to participate in the craze. Just as corporations are to the crypto space, manipulating the divide between the traditional finance system and the legally-uncertain crypto space, so are the users too, with the defining features of Web 2.0's username-password interface mixing with the self-custodial nature of cryptocurrencies. The point is, this is a stark incompatibility that simply should not be
Web 3.0 is the ultimate version yet, and HIVE completely satisfies the vision its about to bring. Necessitating a wallet in order to interact with the blockchain's basal functions forces everyone to learn what it means to be self-custodial, to be in control, to be the sole owner. When the big shift takes place, people are going to experience a massive shift in mindset just as we did transitioning out of Web 1.0.
Conclusion
Centralized exchanges were never the least bit compatible with the tech they are capitalizing on. This isn't going to last much longer, as the SEC is hellbent on structuring a better legal framework to implicate the entirety of the crypto space. They must, as it puts a big threat on their legacy system. Will that hinder Web 3.0's march of progress? Possibly, but the best they could do to hinder the will of the people is throw a wrench in the cogs, but not destroy the entire clocktower.