Note that Bachmann-Fried’s reputation within the digital asset industry is mixed. And while he runs one of the largest cryptocurrency exchanges, Sam is also known for making large donations to political races and pushing lucrative bills.

For example, as a Twitter user nicknamed scott reported the day before, Bankman-Fried has spent $39 million since January this year to “buy” officials from Washington. You can read more about the list here.

Table with Sam’s spending on the policy sphere

How should cryptocurrencies not be regulated?

Here’s a translation of one of the tweets in which the head of cryptocurrency exchange FTX summarises his thoughts.

We need fast and reliable lists of addresses linked to illicit financial flows. But peer-to-peer transfers of cryptocurrencies should generally be free unless they are directed to sanctioned entities.

FTX head Sam Bankman-Fried

Bankman-Fried’s idea is outlined in more detail in an article on the FTX website. The head of the exchange noted that it is impossible to allow absolutely all transactions in the crypto-sphere, as this would lead to a flourishing of financial crime. That’s why a compromise is needed – the Bankman-Fried’s proposed blacklists.

Sanctions lists will simultaneously allow for effective enforcement of sanctions and make sure that you don’t need a passport and national insurance number for any minor action.

According to Decrypt’s sources, Sam admits that putting his ideas into practice can have its pitfalls. Here’s his cue.

What happens if funds from illegal financial activity are moved after that very activity is disclosed, but before all the platforms know about it?

FTX CEO Sam Bankman-Fried

And the problem here is that crypto addresses are not equal to users. Stolen funds can be transferred through an almost infinite number of addresses, with no way to determine who owns each one. As a result, exchanges have to constantly monitor which addresses are associated with illegal financial flows and blacklist them.

But even this has its disadvantages. As a reminder, in August, an anonymous Twitter troll transferred tiny shares of Etherium to hundreds of popular crypto-addresses, with the coins being linked to the Tornado Cash platform, which was previously on an OFAC sanctions list. As a result, some of these addresses were blocked by representatives of other popular platforms, even though they essentially only became recipients of transactions from the sanctioned platform and had nothing to do with it.

Transactions are still coming in from Tornado Cash

This led to a real legal nightmare: de jure all these addresses turned out to be linked to Tornado Cash and should have been added to the sanctions lists too.

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As we can see, even putting all the power to blacklist and sanction individual market participants into one centralised body will not rid the industry of all crime-related problems. More “interesting” innovations Sam suggested should also be implemented among decentralised platforms. For example, here is one line of an extensive document on the FTX website.

Each of the market participants must be subject to OFAC sanctions lists (which, incidentally, are already law). Centralised and decentralised entities must have real-time access to the sanctions list in order not to receive or transfer funds to addresses on it.

Some of the proposals published on the FTX website

So in essence Bankman-Fried, who is one of the most popular representatives of the blockchain industry, recommends that it be censored. Although in theory this goes against the ideals of digital assets, and so such a move by Sam seems like a shot in the foot. Naturally, his reputation among crypto enthusiasts will change in earnest after such a move.

And now to the criticism – the aforementioned lines have caught the attention of renowned investor Ryan Sean Adams and creator of the podcast Bankless, who tweeted the following address to Bankman-Fried.

Sam. With all due respect. This totally sucks. You’re saying DeFi should be put under the knife by OFAC. You say that freezing funds in blockchains should be the norm. You say decentralised finance platforms should register as brokers. No, that is not appropriate. It would destroy the potential of the US in cryptocurrency.

Congressman Tom Emmer also posted his opinion on Twitter. Here’s his rejoinder.

Decentralisation is the goal. If we sacrifice decentralised finance in favour of regulation, we destroy the opportunity for financial innovation.


We tend to agree with the criticism - the innovations proposed by Bachmann-Fried would essentially put all control of the crypto-industry in the hands of individual US government agencies. In other words, transactions could be censored in this country, undermining decentralization and independence of the crypto-sphere. The outcome is already known - cryptocurrencies will simply leave America for jurisdictions with a more acceptable regulatory climate.

At the same time, such an idea should send a message to FTX platform users. There is no telling how Sam will want to please regulators next, or how this will end up for the crypto-asset situation.


What do you think about this? Share your opinion in our Millionaire Cryptochat. We’ll discuss other important developments there as well.