Tech experts seek to burst crypto bubble with scathing letter to US leaders

1 Jun 2022

Image: © Andreas Prott/Stock.adobe.com

The letter is highly critical of crypto and Web3 technologies and directly challenges the purported potential of blockchain technologies.

A group of 26 technologists and academics have signed a letter to US lawmakers criticising crypto investments and blockchain technology.

The letter is addressed to leaders in US Congress, including committee chairs and ranking members, and seeks their support for “responsible fintech policy”.

It urges them to take “a critical, sceptical approach toward industry claims that crypto-assets … are an innovative technology that is unreservedly good”.

The signatories vehemently disagree with what they have deemed a false narrative about the future of Web3 crafted by those with a financial stake in the industry.

The scathing letter also takes issue with blockchain technology itself, disputing claims around its potential. It says that the technology, which underpins Web3, “has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions and are not an improvement on existing non-blockchain solutions”.

It also flags other risks posed by the growth of the crypto industry and its technologies, such as money laundering, ransomware, financial instability, large-scale scams and carbon emissions from the proof-of-work mechanism used by some blockchains.

‘Cryptocurrencies have evolved from idealist dreams to unregulated casinos ruled by swindlers’
– MIGUEL DE ICAZA

The crypto industry – known for its volatility – is still reeling from the recent collapse of Terra Luna and TerraUSD. These cryptocurrencies were issued as stablecoins, meant to pose less of a risk by being pegged to an underlying asset such as a fiat currency, for example, the US dollar. However, the loss of about $500bn from the market when these stablecoins crashed showed that these cryptocurrencies are not as stable as their name would suggest.

This was just the latest in a series of devastating losses to hit crypto investors. Increasingly, warnings are being issued for investors to proceed with caution. Last month, Europe’s central bank chief Christine Lagarde dismissed crypto assets as “worth nothing” and advised against investing in them without being prepared to lose money.

“Any system where you forget your password and you lose your life savings is not a safe system,” Bruce Schneier told the Financial Times, speaking about the letter to US representatives which he signed.

Schneier is a highly respected computer scientist with particular expertise in cryptography and security. He is currently a lecturer at Harvard.

Software developer Stephen Diehl, another of the letter’s signatories, tweeted that “crypto fraud is spiralling out of control”.

“Regulators are paralysed and people are getting hurt left and right. It’s on us as citizens and responsible engineers to help fix the problem we created by our inaction,” Diehl added.

Miguel de Icaza – an entrepreneur, engineer, open-source advocate and signatory on the crypto-critical letter – warned that everyday people jumping on the crypto ‘gold rush’ “lack the expertise to realise they are marks in a sophisticated scam”.

“Cryptocurrencies have evolved from idealist dreams to unregulated casinos ruled by swindlers, yet are branded and sold as sound investment vehicles. In the end, the House wins, it always does,” de Icaza tweeted.

Other signatories include Google Cloud principal engineer Kelsey Hightower, IBM fellow Grady Booch and computer science professor Jorge Stolfi.

Cory Doctorow, Molly White and David Gerard – all of whom have written sceptically on the crypto industry – have also signed the letter.

The letter is now open for the wider tech community to sign.

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Elaine Burke is the editor of Silicon Republic

editorial@siliconrepublic.com