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SEC Sues Binance and CEO Zhao for Breaking Securities Rules Regulator says firm operated unregistered securities exchange Binance routinely flouted basic KYC rules, SEC alleges
On monday some us regulators cracked down on Binance. The allegations flying through the room should be obvious.
SEC’s Coinbase Lawsuit Heralds Deepening US Crypto Crackdown
The crackdown seems to be broader. The outcome of this will almost certainly be years of legal battles and lawsuits. For the government it will all boil down to the question whether Bitcoin is a security, is my guess.

How does the US government see Bitcoin

Bitcoin is a currency. Bitcoin is money. Indeed, it is the best money in the world. No other money in the world is hard and decentralized with such a large userbase, permissionless, private, low fees and instant via lightning and digital.
However, this isn't how the governments around the world see things. Fist of all it must be said that opinions on whether Bitcoin is a forex currency or a consumer product or a resource are very split. While the pure facts make it undeniable that Bitcoin is money, governments around the world are kind of trapped inside the cage of their own laws.
The strongest argument (again, in the eyes of governments) for Bitcoin being a currency is El Salvador declaring it as such.
Bitcoin being a consumer product in the eyes of laws is kinda dead. Sorry, the fungability and liquidity etc make this argument untenable anymore. It was nice while it lasted as a "reasonable doubt" kinda argument tho.
Now to the elephant in the room: security?
Brian Armstrong: There is this thing called the Howey Test, which is the definition of a security. It says, is there an investment of money in a common enterprise with an expectation of profit based on the effort of others? So it has those four prongs. The important thing to know is that all four of those things have to be true. So there's various ways that you could imagine a crypto asset would not be a security. If it's sufficiently decentralized, there's no common enterprise. If there's some specific utility around it, it's not just for the purpose of the value of going up. So what we need in the United States at this point is regulatory clarity, clarity for a long time-
So this question remains open. I personally see governments setteling on "resource"/"commodity" in the sort term and currency in the long term. But it's anyones guess really

Why Exchanges are bad

Exchanges are like banks. They hold fractional reserves. They profit from fractional reserves. Thus they have an incentive to advertise against self custody.
Their incentives are diametrically opposed to us. They are the very thing we set out to defeat, why are we even here? Why do they have so many customers? FCK GO BCK
Bitcoin-backed fractional reserve money will come. No matter if we like it. It will come with traditional banks. It will come with literal physical cash because the stupidity of humans in unmeasurable. Humans are dumb, the possible profits from it a low hanging fruit. Like water finds its way downhill. And it's here in the form of exchanges first.
When exchanges were banned we could push this thing as back as possible and have build up as much as possible real self-sovereign decentralized infrastructure.

How would Bitcoin look without exchanges

On the surface this would be a blow to Bitcoin. Usernumbers going down, maaaybe even mempool less usage. Maybe more if people use onchain transactions to replace custodial stacking.
But only on the surface. This would be good for Bitcoin. Bitcoin is an underground currency at its hearth. This is how Bitcoin was designed to be. The users might be fewer but the users would be usig Bitcoin in the spirit of Bitcoin.
I wrote about why we don't need hyperbitcoinization before: #159684
To me, real Bitcoin usage is more important than easy access for newbies. I'm all for easy access for newbies, it might even be the most underrated property that devs in this space don't focus on enough. But not for the price of selling my sould in a faustian exchange to centralized exchanges.

Final thoughts

This is actually not really my opinion. I'm not a fan of government intervention in general and dgaf what they do. Just tried to give these thoughts a spin to share these thoughts. The only thing I actually care about in the end of this thread is: centralized exchanges bad
I had to respond to this:
If there's some specific utility around it, it's not just for the purpose of the value of going up.
Including the provision of tools to make a token with the purpose of its price going up yes?
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CEX are honeypots for corporate and government surveillance. It's best if they're avoided even if they do exist.
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Loss of privacy is another good point. My thoughts were more focused of the fractional reserves but you're right that centralized exchanges fail the spirit of Bitcoin in many other aspects too
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The price will go down another 86% from here then, hello 3000$ per btc. How do you sell bitcoin for fiat ? P2P fiat on/off ramp filled with fraud and scams. No normie in their right mind will use p2p
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The price will go down another 86% from here then, hello 3000$ per btc.
Bitcoins price always stays the same, always was the same and will be the same. 1btc = 1 btc
How do you sell bitcoin for fiat ? P2P fiat on/off ramp filled with fraud and scams. No normie in their right mind will use p2p
Adoption in the underground happens slowly but organically. Once people realize that their fiat is melting like ice in their hands and they see every craigslist sell having a Bitcoin option and they see their friends splitting restaurant bills with lightning etc. you get a wallet app and just transact naturally.
People using the best currency available to them is just very natural. It just happens organically.
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No one will use p2p. Only computer nerds will use p2p. Only drug dealers will use p2p. Only money launderers will use p2p. Only gamblers will use p2p. Only a small percentage of the population will use p2p. [We are here.] Only small companies will use p2p. Only small countries will use p2p.
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I had a dream about such bitcoin oriented exchanges (price column)
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I'm talking about Bitcoin only. The us government doesn't distinguish. It's an irrelevant discussion anyway, the shitcoins won't be here for much longer anyway.
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I think that's just fearmongering from scammers to get us to unite with them. Gary Gensler seems to understand the difference.
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If you read the quote about the Howey test he might actually be onto something. In the eyes of the law the E. foundation should actually not be that different than e.g. Paypal or Robinhood.
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Yes, but that isn't Bitcoin
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Correct. This is exactly what Gensler is saying
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I think it is best to leave these CEX and make P2P exchanges between users, there is not much more to do the CEX were never holy of my devotion and in the end hopefully there will only be a few or none in the worst case.
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It would be great from a rehypothecation and custody standpoint but I don't see it happening, its big business to trade partially backed sql database entries at high speed and I don't think that's going away anytime soon.
If it were, we would see things like USDT/L-BTC pools on Liquid or something be far more popular and people would just trade on-chain, but hopefully a few more ruggings and a few improvements to DEXs and AMMS and we can move some of that market share away from CEX/VEXs
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I concur.
  • Bitcoin will move out of centralised exchanges to on chain like paper wallets
  • Exchanges may be using the bitcoins deposited as collateral for executive shorts using derivatives
  • This may lead to short squeeze and rise in price as we are seeing now.
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