Blockchain, Crypto-Assets, G20 and all the Hype

According to various media reports, our finance minister and the governor of the reserve Bank of India presented a presidency?input note to the development of a synthesis paper to be published before September 2023 jointly by the IMF and FSB. India's note seems to have 3 main points, namely, the implication of crypto assets on the macroeconomic stability, investor protection and education. It also mentioned about use of crypto in money laundering and terrorist financing. All these are very valid concerns and must be considered in any forms of regulatory intervention in crypto business.??

However, I have a bigger concern regarding the entire decentralized finance concept and in general about the 'trustless' decentralization of information processing and information storage.?I am certainly also quite worried about use of crypto in illicit activities including money laundering or gambling. Also, crypto is being used in defrauding investors of their savings as seen in incidents like Mt. Gox, FTX, Terra-Luna, Celsius, Vauld and many such businesses. In many ways, crypto has become a Ponzi scheme fueled by speculation which is often manipulated by wash trading and other synthetic market making.

But my concern is about the narrative of "trustlessness". The libertarian belief system presumes that the constitutional?institutions and governments cannot be trusted and every citizen is on their own to fend for themselves. This mindset leads to rightwing demands such as gun rights,?militia, and other kinds of local systems of non-democratic?governance and wants to replace constitutional structures and institutions by individualistic or militia-based control of very parochial groups.

It is this mindset of distrust in institutions and government, and democracy in general which is decimating the constitutional democracies and leading to elected autocratic governments all over the world. The loss of faith in constitutional institutions are playing in the hands of rightwing demagogues.

Therefore, when we technologists start pitching the same narrative and claim that technology will solve problems by replacing application of legal remedies to corruption, or replacing institutional guarantees by technologically constructed trust model, we are basically giving up on constitutional democracy that depends on trusted institutions such as judiciary, legislative bodies, central banks, regulators and so on.

It might be true that many of these institutions have failed us frequently but instead of addressing the failures and fixing the problems in legal and political ways, if we plan to replace the faith in the institutions by trusting technology, we will forego our democratic political processes. Further, technology can be controlled by a few resourceful entities and oligarchy of a kind would set in. We already know that the 70% of mining power of bitcoin rests with 4 entities, and 70% of staking power in Ethereum is with 4 entities. Even though the goal was decentralized trust, we have obtained an oligarchic system of governance there.

In summary, I think G20 nations should think very carefully about what it means to embrace innovation in decentralized ledger technology and what implications it might have in shaping the future of our constitutional democracies. May be the only concerns are not the immediate ones like money laundering or financial stability. Something far deeper might be awaiting in the wings.