Sam Bankman-Fried Proposes ‘Respect’ for OFAC in Crypto Regulatory Framework

“For Sam to suggest that the industry ‘should respect OFAC’ is unbecoming,” ShapeShift co-founder Erik Voorhees said

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • “OFAC does not deserve respect. It deserves repeal,” Voorhees said
  • Several crypto observers are combating Bankman-Fried’s DeFi proposals

Sam Bankman-Fried asked for critiques on his proposed crypto regulatory framework this week. The FTX head is certainly getting what he asked for. 

Bankman-Fried’s outline on Wednesday included a disclaimer, saying the potential set of standards is not “exactly correct” and is “just a draft.” 

In the blueprint, he laid out how he believes hacks can be limited and how FTX plans to decide which cryptoassets are securities. He also proposed customer protection standards and a mechanism for audits to confirm stablecoins are appropriately backed by fiat. 

He also proposes regulation using “blocklists,” a move that would ban blockchain transfers between sanctioned parties. 

“Maintaining a blocklist is a good balance: prohibiting illegal transfers and freezing funds associated with financial crimes while otherwise allowing commerce,” he said. 

Added: Bankman-Fried: “Everyone should respect OFAC’s sanctions lists (which, by the way, is already the law).”

A US Treasury subsidiary, OFAC, or the Office of Foreign Asset Control, enforces sanctions against foreign nation-states, blacklisted individuals and red-flagged corporate entities. The aim is to prevent any and all US trade with those slapped with sanctions — a measure that is particularly in play at the moment regarding Russian oligarchs, following the country’s invasion of Ukraine. 

Loading Tweet..

A spokesperson for FTX declined to comment. 

Concerns over ‘respect’ for OFAC in SBF’s regulatory framework

On the face, Bankman-Fried appears to be suggesting mostly logical rules that would safeguard consumers, especially vulnerable retail investors. 

But Erik Voorhees, ShapeShift co-founder, took up a number of concerns with the crypto billionaire. Voorhees, an early Bitcoin adopter, is one of several high-profile industry participants to speak out against some of Bankman-Fried’s proposals. 

Although Voorhees agreed on the need for transparency and scam prevention, he did have opposing views on two key proposals: respecting OFAC and licensure for DeFi-related activities.

He said OFAC’s list includes entire countries and took the example of sanctioned Iran, pointing out that it’s illegal for an American to do business with an Iranian.

“You know those insanely brave Iranian women standing up against oppression in Iran right now? Those women espousing the greatest American virtue of individual liberty and doing so while literally facing torture and death?” he said, referring to the women protesting against the “morality police” in Iran over the death of 22-year-old Mahsa Amini. 

“If you’re an American, it is illegal for you to interact economically with those women, because of OFAC.”

Bankman-Fried suggesting that the crypto industry should respect OFAC is “unbecoming,” he added.

SBF advocates licensure for DeFi activities

Bankman-Fried’s latest thoughts on DeFi are the “most problematic” of his new blueprint, according to Voorhees. 

The crypto entrepreneur said the likes of hosting websites on platforms such as Amazon Web Services, which provide a US retail front-end for decentralized protocols, should require some license or registration. 

Such a move would require know-your-customer [KYC] checks to use a platform such as Uniswap.

Loading Tweet..

“It would mean 80 million Iranians would be prohibited from accessing functions on Etherscan,” he said. “It would even mean a non-custodial Bitcoin wallet interface would be required to spy on its users and report suspicious activities to FinCEN [Financial Crimes Enforcement Network].”

Crypto exchanges such as FTX, Kraken and Coinbase already fall subject to those obligations, he said. 

“With Sam’s above suggestion, the burdens would be expanded to every front end access point to the world of DeFi,” Voorhees said.

Bankman-Fried admits he could be wrong about some of his suggested policies — and clarified he didn’t mean DeFi should be censored.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

The payments firm is exploring PYUSD’s payments use cases

article-image

Planned funds would not stake their holdings, which some say will hurt the ETFs’ appeal for certain investors

article-image

Solana validators voted in favor of a proposal that would send 100% of priority fees to validators

article-image

In November, an iteration of the survey found that 34% of respondents were paying attention to crypto, but that figure has since jumped to 41%

article-image

The sentencing of former FTX exec Ryan Salame is the first among those who pleaded guilty to crimes related to the exchange’s collapse

article-image

BlackRock’s iShares Bitcoin Trust is on the cusp of passing Grayscale’s GBTC in assets under management