Edward Snowden: Crypto is Heading in the Wrong Direction

Updated: 22 November 2022

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

As society progressed from dial-up modems to near-constant online presence via smartphones, the ways in which people interacted with networks changed dramatically.

The internet became not only a place for people to access vast amounts of information and connect with others, but also a way for corporations and governments to harvest large amounts of data.

According to Edward Snowden, this shift away from the internet’s roots was caused in part by corporations that did not prioritize their users.

“We lost that internet because we onboarded billions of people, and the people who were providing the gateways for that didn’t have their best interests at heart,” he said last month during an intimate fireside chat with 75 Camp Decrypt attendees in Napa Valley.

Former NSA contractor turned whistleblower known for exposing an illegal mass surveillance program in the United States in 2013, he sees a similar trend emerging when it comes to cryptocurrency adoption.

Snowden compared the onboarding process at cryptocurrency exchange Coinbase to how Facebook became synonymous with social media.

“We’re seeing people take advantage of the kind of ignorance that has led so many people to believe that tapping the Facebook app on your phone [is] the internet, and that crypto is Coinbase or something equally horrible,” he said.

According to CoinGecko, Coinbase is the only publicly traded cryptocurrency exchange in the United States and the country’s leading exchange by volume. In its third fiscal quarter, the company reported an average of 8.5 million monthly transacting users, a 16% increase over the same period last year.

Coinbase: Forgetting crypto’s mission in the pursuit of profits

Snowden told Camp Decrypt attendees that Coinbase prioritized regulatory compliance over the founding ideals of blockchain-based networks—an innovation that could return power to internet users.

“It’s really nothing personal to those of you in the room who work for Coinbase; you’re just an example of [the] overly compliant, overly indulgent” he said. “Yeah, you’ll get rich, you’ll make a lot of money, but have you actually advanced society’s interests?”

Coinbase claims to have prioritized regulatory compliance since its inception, and the company has stated that working with regulators is critical to cryptocurrencies’ widespread acceptance as an asset class.

“We’ve always believed that for cryptocurrency to gain the legitimacy required for mainstream adoption, compliance cannot be an afterthought—it must be central to how we operate,” the company wrote in a blog post. “Compliance with existing regulatory frameworks is not a choice; it is a requirement.”

Snowden went on to compare Coinbase to a company that sells products similar to a home improvement retailer like Home Depot, adding that its commitment to Know-Your-Customer (KYC) procedures—which helps them stay compliant with anti-money laundering regulations—is a drag on the cryptocurrency space.

“You’re not even making lawn mowers; you’re selling them, but you’ve popularized the lawnmower—lawnmowers are important, they’re valuable,” he said. “But nobody asks me to hold up my passport and scan my face when I go buy a lawnmower, and the fact that you guys go along with that is frankly toxic and embarrassing.”

Snowden stated that companies looking to bring people into the Web3 world while also remaining compliant with regulations should do so in a way that does not compromise the ideals that initially drew people to the industry.

Cave Strategically

“My plea to those of you in the deep end is, if you’re going to cave, cave strategically,” Snowden said. “Make room for the protocol and the kinds of values that we’re all supposed to represent here.”

Coinbase has stated that it has the same responsibilities as other large financial institutions when it comes to verifying customers and enforcing anti-money laundering policies. Many of its compliance programs are patterned after those of retail banks.

According to the company, its compliance programs are designed to protect its customers by monitoring the overall cryptocurrency market and detecting financial crime.

Snowden extended his criticism to any cryptocurrency exchange that keeps track of its users’ funds.

“You don’t want to be in a position where you can check that, because really, even if [the] government says it is, that’s not your role in society,” Snowden explained. “That’s for police and intelligence—that’s their job, and it’s supposed to be difficult.”