Sam Bankman-Fried Under Fire for Controversial Comments on DeFi Protocols

Sam Bankman-Fried, CEO of the crypto exchange FTX, has come under fire by the crypto community for comments that could imply that he is in favor of censoring DeFi protocols.

The comments that drew the ire of the community were part of a “draft set of standards” for the crypto industry proposed by Bankman-Fried on the FTX.us website. Among the most controversial takes in the draft document was a suggestion that transfers between “sanctioned parties” should be censored by blockchain protocols.

The reason given by Bankman-Fried for why it is necessary to censor certain transactions was that allowing all transfers to happen “opens up the door to significant financial crimes,” while banning all transfers except those specifically whitelisted “freezes out the economically disadvantaged.”

“Maintaining a blocklist is a good balance: prohibiting illegal transfers and freezing funds associated with financial crimes while otherwise allowing commerce,” Bankman-Fried wrote.

The FTX CEO elaborated on the same suggestion on Twitter, saying that in order to make such a system work, “fast, reliable lists of addresses associated with illicit finance” are needed.

3) First, it means that we have blocklists and not allowlists for illicit financial activity.

We need fast, reliable lists of addresses associated with illicit finance.

But peer to peer transfers should generally be free as long as they're not going to sanctioned actors.

— SBF (@SBF_FTX) October 19, 2022

Judging from the feedback Bankman-Fried received to his proposal on Twitter, however, the community was not impressed.

“He who is the “illicit finance” decider is a god king, Bitcoin knows no god kings, that’s the point of Bitcoin bro,” one user wrote, while another asked the exchange boss to “Define ‘illicit financial activity’.”

Meanwhile, well-known personalities from the crypto community also took the opportunity to comment under a separate Twitter thread that Bankman-Fried opened by saying “keeping DeFi and peer to peer transfers free is crucial.”

“I could be wrong about those policies – I probably am wrong about some! But in the end the most important thing is to keep commerce and expression free,” Bankman-Fried wrote in an attempt to address some of the criticism received after first publishing his proposals.

Despite this conciliatory tone, leading voices in the community such as ShapeShift CEO and early Bitcoin (BTC) proponent Erik Voorhees, and Ethereum (ETH) developer Tim Beiko, were still critical:

Free =/= KYC
Free =/= OFAC
Free =/= Licensing

— Erik Voorhees (@ErikVoorhees) October 20, 2022

What do you mean by "free"?

— timbeiko.eth (@TimBeiko) October 20, 2022

The community’s stance was perhaps best summarized by Chris Blec, a widely followed crypto influencer and podcast host, who said:

“You don’t need policies to keep p2p transfers “free”. You don’t need laws to make things legal. You just need to leave them the fk alone.”