By Pam Martens and Russ Martens: July 13, 2022 ~
The letter is a punch in the gut to the Wall Street underwriters who have brought billions of dollars of crypto related companies to the public markets, most of which have now collapsed in price. It makes the billionaire venture capitalists who have invested billions in crypto startups look like fools. And it renders the big-name celebrities who have promoted this garbage in TV commercials look like the shills that they are.
The letter was sent to key members of Congress and to the Chairs of the Senate Banking and House Financial Services Committees. It is signed by more than 1,600 computer scientists, software engineers and technologists from around the world. There are 45 signatories who currently work at Google; 19 who work at Microsoft; 11 employed at Apple. (Those three companies currently have a collective market capitalization of more than $5.75 trillion; they can afford to hire the best and the brightest.) There are signatories that are Ph.Ds from the most prestigious universities in the world, including the University of Oxford and MIT. And all 1,600 have signed a letter that says this about crypto and blockchain:
“We strongly disagree with the narrative—peddled by those with a financial stake in the crypto-asset industry—that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans…
“As software engineers and technologists with deep expertise in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. Blockchain technology cannot, and will not, have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human-in-the-loop to reverse transactions; blockchain permits neither.”
The letter links to an article from Bruce Schneier, a Security Technologist who teaches at the Harvard Kennedy School. The article appeared at Wired on February 6, 2019 under the headline: “There’s No Good Reason to Trust Blockchain Technology.” The article makes the following salient points:
“What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure.
“When that trust turns out to be misplaced, there is no recourse. If your bitcoin exchange gets hacked, you lose all of your money. If your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. If someone successfully hacks the blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?”
Losing your money is mostly what has been going on this year in crypto. In addition to crypto itself being a dubious “investment,” the Federal Trade Commission reported in June that “since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams. That’s about one out of every four dollars reportedly lost to fraud during that period.” (For more on the perils of crypto investing, see our report on how customers on the Coinbase crypto exchange are being victimized.)
Given this factual background, the speech delivered by Fed Vice Chair Lael Brainard at the Bank of England in London last Friday is an embarrassment to the U.S. central bank. In the speech, Brainard repeatedly makes reference to the “crypto financial system” as if it’s a real thing. Crypto is a “financial system” like Bernie Madoff’s illusory split-strike conversion was delivering consistent 13 percent returns each year. In both cases, there’s no “there” there.
Brainard’s idea is to regulate crypto. China had a better idea. It outlawed it, as have eight other countries with dozens more countries severely restricting its use.
The U.S. Congress appears to be too beholden to crypto money to take a stand. That needs to change and the way it can change is for corporate CEOs at top technology companies in the U.S., like Google, Microsoft, Apple, Cisco, Intel, IBM and others, to start writing OpEds about the sham of crypto and blockchain in the New York Times, Wall Street Journal and other newspapers with wide circulations. If their own tech workers are willing to put their reputations and careers on the line by signing this letter, surely a CEO or two could find his voice before more Americans are defrauded and before the U.S. loses its competitive edge relentlessly pursuing a sham technology.