Crypto shows we shouldn’t worship innovation for its own sake

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Big Crypto is in the middle of a big calculation. After a series of spectacular crashes and implosions last year, two of the strongest and most profitable crypto companies still standing Coinbase and Binance have been hit with lawsuits from US regulators for days in a row this month. A third, Ripple Labs, is still battling a case brought against it in 2020, having spent over $100 million in legal fees so far.

It’s not the most overt cryptoland scammers and scammers who are targeted here (there are a lot of them, but they tend to be relatively small). These are the companies that have gone out of their way to look like legitimate companies; those who tried to make themselves acceptable to regulators, Silicon Valley and politicians.

These are the dressed-and-booted guys who dine with presidents and get close to the celebrities on the Z-list of Tory MPs in the House of Commons. The guys who brag about great encounters with the Economic Secretary of the Treasury and selflessly write about their desire for the UK to be a big part of [cryptos] success and their belief that Britain needs to put Web3 and blockchain at the heart of government (groan).

This crypto-sensitive mob has relentlessly pushed crypto by presenting it not as a miraculous way to earn obscene amounts of money out of thin air, but as a crucial innovation that countries must adopt if they don’t want to be left behind. Now they and their supporters are trying to fight back against the US Securities and Exchange Commissions crackdown with the same rhetorical argument: Any move to regulate or punish the crypto Wild West will stifle said innovation.

The SEC is seeking to kill crypto innovation in the US, Ripple Chief Executive Brad Garlinghouse said in a video posted to social media last week, after some documents relating to the SEC v. his company. The SEC is creating a regulatory environment hostile to innovation, Tim Draper, venture capitalist and friend of another famous innovator, incarcerated fraudster Elizabeth Holmes, told Fox Business last week.

This accusation is so widespread that the SEC even had to explicitly deny it: We’re not here to stifle innovation, we’re here to stifle fraud, the SEC’s chief enforcement officer said last week.

But what do we even mean by innovation? The Cambridge Dictionary defines it as a new idea or method, or the creation and use of new ideas or methods. Yet the way it tends to be used is more like a technical thing that no one really understands, but which could one day be useful and could certainly make some money at some point.

It works really well for the industry to frame every technology they put out into the world, whether it’s its crypto or generative AI, or whatever else it’s like an innovation that we need to pursue, Paris Marx, host of the Tech Wont Save Us podcast, tells me. But Silicon Valley and venture capitalists aren’t really interested in developing technology for the good of society… They’re interested in making money off the hype cycle that they will trigger next.

Sometimes the problem with innovation is that while the idea in question may be new, it’s actually not very useful: it’s a solution in search of a problem, as in the case of technology. blockchain. And sometimes the problem is that innovation, while not without utility, is incredibly harmful: synthetic opioids have brought relief to millions, but they have also created an epidemic of overdose, killing nearly 80,000 Americans in 2022 and helping to drive US life expectancy to a 25-year low.

So why have we come to view innovation as an unadulterated good, and why is stifling it so clearly bad? The purpose of the innovation and the possible impact should certainly also matter. Innovation can be crucial to making progress in all sorts of fields, like medicine or science, but we seem to have come to a point where it’s the idea itself that we revere. This is a mistake: innovation should not be seen as an end in itself, but as a means to improve something.

Cryptography may be new, but that doesn’t make it useful or valuable to society. We cannot continue to imagine that all innovation is a force for good. In practice, innovation often simply means exploiting loopholes in existing rules until regulators catch up with what is known as regulatory arbitrage, a strategy the crypto industry has deployed with great success. and on which she relied. Unfortunately for these resourceful crypto innovators, catching up is exactly what regulators are doing right now.

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