Will Wall Street's interest in Bitcoin scare away crypto punks?

Original Title: 《Will Wall Street Interest in Bitcoin Scare Cypherpunks Away?》

Written by: Mat Di Salvo, Decrypt

Compiled by: hiiro, SevenUp DAO

Institutional investors are more interested in the crypto world than ever before, and now they are putting money into it. However, some are wondering if Bitcoin will lose its reason for existence as a result.

BlackRock, the world's largest asset management company, has never been more mainstream. This Wall Street firm, which manages $9 trillion in assets, is the epitome of "institutional."

However, last month it submitted an application to the SEC for a spot Bitcoin exchange-traded fund (ETF), pushing the price of the largest cryptocurrency to its highest point in a year. Its billionaire CEO Larry Fink subsequently praised cryptocurrency as "digital gold."

Bitcoin was originally a counter-establishment initiative. Favored by crypto punks who are skeptical of government, it was initially criticized by every major institution, including the European Central Bank and JPMorgan, and seemed poised to liberate finance from the shackles of centralization.

"The reason Bitcoin was created is that there are huge problems with the traditional system, and making Bitcoin itself mainstream goes against its purpose," a long-time contributor to the Bitcoin privacy wallet Wasabi, known as Rafe, told Decrypt. He added that the differing priorities between cyberpunks and regulators "are to be expected."

Cyberpunks typically advocate for privacy rights, hope for social change, and view Bitcoin as a tool to evade oppressive government surveillance. Institutional investors focus on making money—Bitcoin is something they can invest a portion of their large funds into for returns.

Bitcoin users who prioritize privacy and spoke with Decrypt expressed concern that institutional interests could ultimately lead to governments imposing restrictions, penalties, or taxes on crypto users.

Major cryptocurrency exchanges like Coinbase and Binance have already implemented KYC measures and broadly restricted access to their platforms based on political boundaries. Legislators are also increasingly focused on anti-money laundering (AML) procedures. However, the emergence of such compliance measures in the crypto space has drawn criticism from long-time privacy advocates.

Rafe stated, "The desire for overnight wealth and the push for mainstream adoption may force crypto users to comply with 'totalitarian rules.'"

He added that because every transaction is publicly recorded on the blockchain, the combination of strict KYC rules and a lack of emphasis on privacy could create "the largest global financial surveillance system in history."

Harry Halpin, CEO and co-founder of Nym Technologies, said, "The fundamental innovation of cryptocurrency comes from the philosophy of crypto-anarchism, and if you abandon that spirit, then innovation in the crypto space will die."

However, Bitcoin users continue to develop privacy solutions for Bitcoin, as the asset is inherently not private. Rafe told Decrypt that having a private wallet can prevent large governments and institutions from intruding on users.

Some say Wall Street is approaching cryptocurrency, whether people like it or not. David Schwed, COO of blockchain security firm Halborn, previously told Decrypt that those in the anti-establishment crypto space who hate intermediaries will ultimately turn to privacy coins.

For others, the issue is not Wall Street itself but Silicon Valley, as Wall Street makes things more centralized.

Bitcoin design contributor Christoph Ono said, "Meta proved again last week when they released Threads that they are ruthless about collecting various personal data, as seen in the privacy policy in the App Store."

Meta's new social media platform Threads launched this month as a competitor to Twitter. It allows Instagram users to share text updates but is more aggressive in data collection than Meta's other apps, especially regarding location-related information, even when location sharing is disabled on the device.

Deleting a Threads account is also impossible unless the Instagram account is deleted simultaneously.

Ono added, "Data is too great a temptation for the tech industry," and "there's no way to bypass established privacy tools that are impossible to breach."

So what solutions exist today? While Rafe's work with Wasabi may be too complex for the average Bitcoin user, Karo Zagorus, who previously worked at zkSNACKs, the company behind Wasabi, told Decrypt that self-custody is sufficient.

Self-custody of Bitcoin or cryptocurrency means users have complete control over their private keys, such as using hardware wallets. However, custodial wallets are more popular because investors do not have to worry about seed phrases and keys. Instead, their cryptocurrency is entrusted to third parties, such as exchanges.

"As long as individuals hold Bitcoin non-custodially, we don't have to worry about alternative Bitcoin products from Wall Street, like ETFs." He added that "the problem only arises when 'institutions' start manipulating the ledger and inflating supply," which can be checked through on-chain audits.

Scott Norris, co-founder of independent Bitcoin miner LSJ Ops, added that KYC is becoming an increasingly important issue for regulators—therefore, those who want to protect the privacy of their holdings may soon have few options left.

Craig Raw, developer of Bitcoin Sparrow Wallet, said:

"Enforcing KYC on all crypto users in a permissionless network would require centralized control over all our computing devices, which is ultimately very difficult to achieve."

However, despite some differences among Bitcoin users, one shared viewpoint is that Wall Street's entry into the space is inevitable.