McKenzie shared his pre-written testimony via Twitter on Tuesday ahead of his Wednesday appearance before the Senate Banking Committee — and he explained that even though he holds a degree in economics, he still found himself at a loss to understand how the cryptocurrency market was not by definition susceptible to fraud on a massive scale.
— Ben McKenzie (@ben_mckenzie) December 13, 2022
McKenzie explained in his testimony that he could certainly understand why people might not necessarily trust banks and how attractive it might be to have an alternative — but that the alternative presented by cryptocurrency was to move trust from banks to technology.
“You cannot create ‘trustless’ money because money is trust. We made it up; it’s a social construct. Like all social constructs, money relies on trust forged through social consensus. You can no more create a ‘trustless’ money than you can a governmentless government or a religionless religion. The applicable words are anarchy and cult,” McKenzie stated.
“What ‘trustless’ means in practice in crypto is placing your trust in the people who run the exchanges, or issue the coins, or anyone else who takes your real money in exchange for lines of computer code stored on ledgers called blockchains,” he continued. “Code does not fall from the sky; people write it. I believe few of the people in the cryptocurrency industry have earned the trust of the public.”
McKenzie went on to argue that the proposed decentralized structure of cryptocurrency — and the proud insistence of many advocates that losing money in crypto stemmed from investors’ failure to do their own research — actually opened the door for more potential fraud rather than less.
He explained that the industry had essentially created a parallel universe within the world of finance, but that universe had intentionally been built without a lot of the safeguards and regulations that existed in the traditional banking system — and it gave the people working behind the curtain no real reason to behave in an honest or ethical way.
“Be careful what you wish for,” he warned. “The simple truth is that in an unregulated market, at every juncture where value is transferred from one party to another, not only is there nothing preventing one or more parties from committing fraud, there is often very little even disincentivizing them from doing so. If you can rip people off and get away with it, why not do it?”
Comparing the structure of cryptocurrency marketing to that which might be seen as part of a pyramid scheme, McKenzie added, “I submit to you today that the entire cryptocurrency industry resembles nothing more than a massive speculative bubble built on a foundation of fraud. In my opinion, it is the largest Ponzi scheme in history by an order of magnitude.”