Chief Executive Officer of crypto exchange FTX, Sam Bankman-Fried (SBF), has proposed a crypto regulation model where blocklists and sanctions will be used. He noted that crypto regulation is inevitable but cautions that the industry will only grow if the right regulatory approaches are used.
Sam Bankman-Fried Pitches Blocklists And Sanctions
The FTX boss says his proposed model will allow individuals to trade unless sanctioned freely.
“We need fast, reliable lists of addresses associated with illicit finance,” he tweeted. This is entirely different from the allow lists or whitelists model where individuals who are not explicitly granted permission are banned from trade by default. SBF added that peer-to-peer transfers should be free if they are not directed at sanctioned persons.
To echo his points, FTX wrote on its website that using allow lists can burden commerce and innovation heavily. This can further freeze out the economically disadvantaged. At the same time, opening the doors to all transfers could lead to more financial crimes in the industry.
SBF said the action can simultaneously enforce sanctions compliance and at the same time ensure that the users do not need social security numbers or passwords for regular transactions.
However, it can be difficult to enforce such sanctions in practice. FTX raised timing concerns, pointing out a scenario where illicit financial activities are moved after the activities are discovered before all platforms are informed about the transactions.
FTX Explains Problems Linked To the Present Regulatory Model
Crypto addresses are usually more than users on the blockchain network. As a result, stolen crypto assets can be moved to a virtually unlimited number of addresses, with no information or idea of the owner of each address.
This means that exchanges will have a tough job of consistently monitoring the addresses that are linked to illegal funds and blacklisting them accordingly. FTX says the task also brings its unique set of issues.
In August, a Twitter troll dusted very small amounts of “tainted” Tornado Cash ETH on hundreds of high-profile addresses immediately after OFAC sanctioned the protocol. This led to legal issues for the affected holders of the accounts.
To solve such issues, FTX suggested that OFAC open an address for a dusting victim that will allow them to transfer their illegal funds, freeing their address from being given a blocklist status.
