SBF vs. Eric Voorhees: Is regulation the future of the DeFi space

FTX CEO Sam Bankman-Fried was in the news again and the CEO may have caused some ripples in the crypto community for his alleged views and thoughts. The FTX CEO appeared on a podcast hosted by Bankless on 28 October. His participation was largely associated with the regulatory policy shared by him on 19 October.

After several days of going back and forth with critics around the policy, Bankman-Fried went live on the podcast to clarify his final stance. His stance being that of increased regulation and scrutiny of stablecoins.

However, the FTX CEO was accompanied by Eric Voorhees, the founder of DeFi platform ShapeShift. Voorhees also happens to be a vocal critic of Fried’s proposed policy. Furthermore, Voorhees also questioned the crypto billionaire about his stance on DeFi regulation. He also questioned the exec over his controversial aspects around his regulatory proposal. 

DeFi regulation is coming, whether you like it or not

Right from the get go, Sam Bankman-Fried stated that he was in favor of increased regulation and scrutiny of stablecoins. This was majorly aimed towards the audits of stablecoins to determine its backing by fiat or any other asset. 

Speaking of DeFi regulations, Bankman-Fried clarified that it wasn’t the question of “if” but rather the question of “when”. He believed that regulation was coming, whether the industry was in favor of it or not. 

This was then countered by Eric Voorhees, who expressed his concerns surrounding certain aspects of the regulation. These included concerns around the absence of decentralization from the DeFi industry. The ShapeShift founder also argued that DeFi was inherently transparent. Furthermore, it was much more than traditional finance, and that regulators should acknowledge the same. 

In his defense, SBF confessed that he was willing to compromise on certain aspects of DeFi. However, this was as long as “smart contracts, validators and payments remain open and free”. The crypto billionaire also stated that these were the elements that represented a majority of value for DeFi. 

Furthermore, SBF was also accused of trying to equate DeFi to traditional finance in terms of regulations. Voorhees argued that this comparison didn’t make sense, since DeFi’s difference from usual finance was the crux of the industry. 

Addressing the issues around Bankman-Fried’s lobbying efforts, Voorhees urged him to not compromise too much during the early stages of DeFi. 

The document that started it

The controversies surrounding Sam Bankman-Fried’s stance on DeFi regulation, began after he shared a document titled “Possible Digital Asset Industry Standards”. This document listed a set of voluntary policies for DeFi firms to follow until regulators established some regulatory clarity. 

The document contained some controversial language pertaining to the regulation of the space. The FTX CEO urged the industry to “respect” the Office of Foreign Assets Control (OFAC) which was behind the sanctioning of Tornado Cash. Furthermore, he also proposed a 5% cap on bug bounties. The document did not sit right with most of the crypto community. 

Eric Voorhees published an op-ed on the proposed regulatory standards, criticizing and questioning several aspects of the document. 

The community’s viewpoint

Sam Bankman-Fried’s thoughts on the podcast, as well as his proposed regulatory standards, attracted a lot of criticism from the community. His stance has been described as leaning towards centralization and robbing crypto of its essence by likening it to traditional finance. Influencers such as Ben Armstrong, better known as BitBoy, have urged people to shut down their FTX accounts. 

If you don’t close your @FTX_Official account today and get your funds off that exchange ASAP… I’m sorry but you are the definition of Low IQ and you deserve what’s going to happen to you.

— Ben Armstrong (@Bitboy_Crypto) October 29, 2022

It is possible that the crypto community did not expect talks of enhanced regulation and possible centralization from a leader like Sam-Bankman Fried. His thoughts stood in contrast to the “white knight” persona he gained for bailing out several distressed firms during the crypto winter.