Crypto shows we shouldn’t venerate ‘innovation’ for its own sake

Massive Crypto is within the midst of a giant reckoning. Following a sequence of spectacular crashes and implosions final yr, two of essentially the most highly effective and worthwhile crypto firms nonetheless standing — Coinbase and Binance — had been hit by lawsuits from US regulators on successive days this month. A 3rd, Ripple Labs, continues to be combating a case introduced towards it in 2020, having spent greater than $100mn in authorized payments thus far.

It isn’t essentially the most overt rip-off artists and conmen in cryptoland which can be being focused right here (there are lots of of these round, however they are typically comparatively small fry). It’s the firms which have carried out their utmost to appear to be professional companies; those which have tried to make themselves palatable to regulators, Silicon Valley and politicians alike.

These are the suited-and-booted sorts who have dinner with presidents and who cosy up to Tory MPs-cum-Z-list celebrities within the Home of Commons. The categories who boast of “great meetings” with the financial secretary to the Treasury and who write altruistically about their want for the UK to “be a giant a part of [crypto’s] success” and their perception that Britain should “put Web3 and blockchain on the coronary heart of presidency” (groan).

This “sensible crypto” crowd has relentlessly pushed crypto by framing it not as a miraculous technique to make obscene quantities of cash out of thin air, however as an important “innovation” that nations should embrace if they don’t wish to be left behind. Now, they and their backers try to combat again towards the US Securities and Change Fee’s crackdown with the identical rhetorical argument: any transfer to control or punish the Wild West of crypto will stifle mentioned “innovation”.

“The SEC is seeking to kill crypto innovation in the USA,” Ripple chief govt Brad Garlinghouse mentioned in a video posted to social media final week, after the discharge of some paperwork pertaining to the SEC’s case towards his firm. “The SEC is making a regulatory setting that’s hostile to innovation,” Tim Draper — enterprise capitalist and good friend of one other well-known innovator, the incarcerated fraudster Elizabeth Holmes — instructed Fox Enterprise final week.

So prevalent is that this cost that the SEC has even needed to explicitly deny it: “We aren’t right here to stifle innovation, we’re right here to stifle fraud,” the SEC’s director of enforcement mentioned final week.

However what can we even imply by “innovation”? The Cambridge Dictionary defines it as “a brand new thought or methodology”, or “the creating and use of latest concepts or strategies”. But the best way it tends for use is extra alongside the strains of “a tech-y factor that no person fairly understands however that may sooner or later be helpful and will positively make some cash in some unspecified time in the future”.

“It really works very properly for the trade to border each expertise that they put out into the world — whether or not it’s crypto or generative AI, or no matter else — as an innovation that we should pursue,” Paris Marx, host of the Tech Received’t Save Us podcast, tells me. “However Silicon Valley and enterprise capitalists are usually not truly thinking about growing expertise for the betterment of society . . . What they’re thinking about is being profitable off of no matter hype cycle they will gin up subsequent.”

Typically the issue with innovation is that whereas the concept in query may be new, it’s not truly very helpful: it’s a answer in search of an issue, as within the case of blockchain technology. And generally the issue is that the innovation, whereas not with out its makes use of, is extremely dangerous: artificial opioids have supplied hundreds of thousands of individuals with ache aid, however they’ve additionally created an overdose epidemic, killing nearly 80,000 Individuals in 2022 and serving to to drive US life expectancy right down to a 25-year low.

Why is it, subsequently, that we have now come to see “innovation” as such an unalloyed good, and why is “stifling” it so unequivocally dangerous? Certainly the target of the innovation — and the doable repercussions — ought to matter, too. Innovation may be essential in making progress in all kinds of areas, corresponding to medication or science, however we appear to have acquired to a spot the place it’s the thought itself that we venerate. That’s wrong-headed: innovation shouldn’t be seen as an finish in itself, however as a method of constructing one thing higher.

Crypto may be novel however that doesn’t make it helpful or worthwhile to society. We can not go on imagining that every one innovation is a drive for good. In observe, “innovation” typically simply means exploiting gaps in present guidelines till the regulators catch up — so known as “regulatory arbitrage”, a method that the crypto trade has very efficiently deployed and certainly relied upon. Sadly for these ingenious crypto “innovators”, catching up is precisely what regulators at the moment are doing.

jemima.kelly@ft.com