Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

Can you functionally use them in the way you intend to?

Are they fungible currency for which you have access to goods and services (hah! they're not that even now...)

You don't get to "opt out" from society with a clever technical trick and some cryptography. For better or worse, we're in this together.

Society is not a thing you can delegate to other people. It's literally the deal we're all working with as a group. If you think the group is making bad decisions... make a compelling argument and put it in front of the group. Or Leave. Or rebel.

The ledger entry doesn't do you much good when you're bound by the covenants of the society you live in, and they think the ledger is wrong.

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The only place it may help is if you plan on intentionally breaking the covenants (ex: committing crime and fraud, such as black market deals - where I do actually believe crypto has a compelling use case [and have used it for such on the og silk road]). But now it's just a twist on the "rebel" category, and governments can and will treat it as such (see: China).

And of course, once you've opened the door to not being fully backed, now we're just arguing about exactly how not backed things are. There are other reasons you may need to flex a bit more than you might expect.

It is probably more profitable to try to delineate what they are allowed to do rather than what they are not allowed to do.

Also, some really superficially appealing regulations cause problems if you try to manifest them in the world. My guts wants to agree that you should always have to have the exact thing your account is denominated in, but if you want to enable international transactions, surely a sensible thing to want to do, now you need to allow some flex for the fact that if there's a three-way transaction between dollars, yen, and bitcoin, there's going to be some conversion. If the exchange is going to permit this, they probably don't want to acquire the other currencies for every single transaction, paying a non-trivial overhead each time, they're going to need to be allowed to hold a certain amount of reserves of each currency they transact in, even though this will come out of the customer funds.

All this stuff makes sense and if done responsibly isn't necessarily a problem. The problem is that over the weeks, months, years, decades of it being done in a way that isn't necessarily a problem, there's all the incentive in the world to chip away bit by bit until it becomes a problem. This goes back all the way to the concept of coin shaving (the reason your coins all have ridges on the side) and I'm sure it wasn't a new idea then. Put whatever rails in you like, people always find ways of going right up to them, and then just a bit beyond, and then a bit more beyond....

>Administered by Armanino LLP, the Proof of Reserves audit is the second of its kind conducted on our exchange since 2014, and it affirms that more than $19 billion worth of client bitcoin and ether is safely – and provably – on our platform. This includes the $3.5 billion worth of ether held in Kraken’s secure on-chain staking service, the industry’s leading ETH2 validator.

Though the audit covers just two of the over 100 assets available for trading on our exchange, it adheres to, and seeks to advance, recommended standards for new cryptographic audits that we hope will become widely embraced in the digital asset sector.

Securities exist only in the context of legal systems and regulators that label things as securities. They have literally no meaning outside of that context.

If you can create a token in a way that either is not clearly in the jurisdiction of one of these bodies or in a way where it is impractical for those bodies to enforce those rules, then people can scream "security" all they want but it's not going to have any practical effect.

There are other ways they can do proxy enforcement and such but if your question is seriously "how can this exist", id say that's a pretty straightforward answer and the potentially interesting question is "what is the framework for preventing this" and "do we have/ are we willing to allocate the resources and manpower to actually do those things"

Until you figure that out, these things will be around