On October 20, 2022, FTX CEO Sam-Bankman Fried elaborated on his ideal legal system for the cryptocurrency market.
The billionaire declared that he supports regulating through the use of blocklists or blacklists, a mechanism in which people are free to trade unless specifically forbidden. Contrast this with whitelists or allowlists, where users are automatically prohibited from trading until permission is specifically given.
“We need fast, reliable lists of addresses associated with illicit finance.” “But peer-to-peer transfers should generally be free as long as they’re not going to sanctioned actors.”
Sam Bankman Fried
FTX CEO says that there should be a healthier balance
The exchange, perhaps through its top executive, went on to further argue that adopting allowlists would be a significant barrier to innovation and trade that “freezes out the economically disadvantaged” in a more in-depth document titled “Possible Digital Asset Industry Standards” on FTX’s website.
The exchange, on the other hand, warned that enabling all payments would invite financial wrongdoing. It contends that blocklists achieve a far more wholesome balance between the two.
“This can simultaneously enforce sanctions compliance effectively while also making sure that you don’t need a passport and social security number to buy a bagel from 7-11.”
Sam Bankman Fried
The blockchain does not treat crypto addresses as users. The amount of addresses via which stolen money may be transmitted is practically endless, and it is difficult to determine who is the owner of each address. Exchanges are now faced with the challenging task of continuously identifying addresses linked to illicit money and blacklisting them accordingly.
The exchange also suggested that “trusted actors” keep a list of addresses that are believed to be connected to financial crime but are nonetheless acceptable for use in transactions.
To “cure” any dusted victims’ addresses from blocklist status, FTX advised that OFAC construct an address just for them to transmit their unlawful payments to. He also stated that the key points that genuinely defend customers and economic freedom—are absolutely necessary before he can support any given measure, framework, etc.
He also spoke about tokenized equities, DeFi, and stablecoins in the detailed blog post.