The new crypto is criming and state coercion, wrapped up into one

Liberals and libertarians should make common cause against it

Dan Davies and I have a new piece on crypto that just went live at the New York Times. The piece is about the (very bad) legislation that is going through the U.S. Congress right now. But there’s a political history behind it, and perhaps too a political story going forward. [Update: Read Dan’s piece too, which has fantastic discussion of a different aspect of the problem]

As I read the history, crypto’s political project begins, quite explicitly, in efforts to curtail the power of the state or do away with it altogether. The entire motivation for various crypto schemes to improve the human condition by bootstrapping together libertarian philosophy with zero knowledge proofs, Byzantine general problems &c &c is to create systems that can maintain consensus without any single central point of authority. That turns out to be quite hard to do: hence the complicated rigmarole of proof of work, proof of stake etc as the construction blocks for incentive systems that can build and communicate consensus over who owns what bit of money. That is where crypto had its beginnings.

Equally, that is why crypto has been at odds with state power, ever since it started creating an infrastructure that attracted other people in. Governments don’t want to lose their central role in finance, which is, after all, one of their major sources of authority. Hence, until recently, we’ve had an extended battle between crypto and regulators. Every time that someone tried to use crypto to really challenge government power - for example, Mark Zuckerberg’s Libra/Diem project, which was very clearly aimed at creating a global substitute for the US dollar - regulators have used their powers to stop it.

That in turn, created a very clear dichotomy between people (mostly libertarians) arguing for decentralized systems, with all their benefits and drawbacks, and people (drawn from the left and right) pushing for centralized authority, with its own particular set of merits and defects. My co-author Abraham Newman and myself wrote a lot over the last several years about these topics, careening back and forth between these ideological positions. Our article about how centralized financial and information systems could be weaponized was taken up by Vitalik Buterin, who came up with the ideas for ethereum, but Abe and I also argued that it was overall a good thing for the feds to tame Binance. I’d like to think that there was some logic to our approach, even if there wasn’t much abstract philosophical coherence - different aspects of the problem suggest different solutions, and different balances that you might want to strike between centralization and decentralization. The book that Abe and I wrote tried not to adjudicate the question, but to spell out the relationships and contradictions between the different positions on decentralization and centralization in fights over international financial and informational coercion.

Now, I think, things have changed. The failure mode of decentralized financial arrangements is that without regulation, financial arrangements that range from the sketchy to the actively horrible become easier, facilitating theft, fraud, blackmail, payments for child pornography. The failure mode of centralized financial coercion is that this coercive power can be used for self-centered or actively nasty purposes - for example, to enforce sanctions against prosecutors who go after your allies for war crimes.

One of the points of Dan’s and my op-ed is that the current coalition involves both of these things at once. It has adopted an approach to crypto that eases off on regulation of all of the horrible shit that crypto can enable - Trump’s Justice Department acknowledges that crypto mixers and other platforms are being used for all sorts of awful things but says that as a matter of policy, it will not prosecute them. At the same time, the people who are legislating for “stablecoins” (the topic of our op-ed - a kind of crypto that leverages dollar deposits) are claiming, with some justification, that legitimating them will increase American power. So you will plausibly end up then with the worst of both worlds: more crypto-enabled criming, and more unbridled state coercion, exercised not against criminals but other countries.

The op-ed suggests that this may not work, and may in fact help undermine the global financial power of the United States (while we don’t have space to talk about it, there are other factors too - who would expect the Trump administration to sign off on e.g. dollar swap lines to other countries if there was another financial crisis?).* We describe how the European Union’s central bank is treating these proposals with alarm - but also beginning to talk about how an EU “digital euro” that is backed by the public sector might be attractive not only to Europeans but the rest of the world as well.

But there is a broader political point here. If you are a sincere libertarian advocate of crypto-currencies (and there are some such concealed amidst the degenerate gamblers and get-rich-quick artists), you have excellent reason to oppose the horrid chimera of crypto and state power that is represented by the Trump administration. This is not the kind of crypto that you fought for. If you are a sincere left-to-liberal-to-constitutional-right advocate of greater government regulation, you also have excellent reason to oppose it. This is not the kind of state power that you want.

The Trump administration is scrambling coalitions on the right, creating a new, albeit fragile alliance, between go-back-to-the-1950s social conservatives and Silicon Valley let-our-glorious-future-rip effective accelerationists. It is also creating a new version of American capitalism, in which business interests and the state merge into each other. And much of the action is happening precisely in the space where economic coercion hits information technology: look at the photos from Trump’s tour of the Gulf countries, where he turned US national security leverage over semiconductors into a bargaining chip.

People are paying less attention to how these changes may be scrambling coalitions elsewhere too. Back in mid-2024, Buterin was already warning that there is “a particular style of being "crypto-friendly" that is common to authoritarian governments.” People like Julian Sanchez at WatchCats have done hero’s labor in explaining the toxicity of DOGE. Projects like Bluesky reflect a weird mindmeld of libertarianism and the left, originating in crypto, but with emphatic left-leaning values, that we haven’t really begun to think about in coherent ways.

There is something new and complicated beginning to take shape, which melds crypto’s strong distrust of centralized arrangements with more left leaning political values. I don’t know whether it is going to succeed, or how it intersects with traditional electoral politics. It could be quite fragile, if new issues arise that accentuate the differences of political values among those pursuing it. It could just be a temporary marriage of convenience for strange bedfellows, united primarily by their detestation of the Trump administration and what it is doing. It could build new lasting coalitions.

I don’t know. But the obverse of the new politics that meld crypto stablecoins and state coercion together are the political coalitions, both in the U.S. and elsewhere, that are emerging to oppose it. We really need to begin figuring out what those coalitions are likely to involve and do.

* Not my area of expertise, but my understanding from talking to others is that while the Fed would administer the swap lines, it would have to ask permission from the Department of State.