This is an opinion editorial by Julian Liniger, the co-founder and CEO of Relai.

Bitcoin exists for a couple of reasons: As money that anyone, anywhere can use, and as a monetary good that is guaranteed not to be diluted or devalued by a central bank. But it’s also a piece of software that deliberately takes away the power of insiders — no matter if those insiders are large miners or bitcoin whales.

What we’ve seen in the larger cryptocurrency space over the past few years has been a perversion of those ideas and principles. The fact that the U.S. Securities And Exchange Commission (SEC) is (finally) waking up to those shenanigans is something that was to be expected.

When Profit Trumped Common Sense

The pursuit of exponential profits with very little upfront investment of time, brain power or capital has not just helped crypto-token Ponzi schemes take off. It has allowed rent seekers like FTX, BlockFi, Luna, Celsius, Three Arrows Capital and countless “Web3” projects to be perceived as “innovations” instead of just pure cash grabs.

While it’s a venture capitalist’s (VC’s) job to put bets on what he or she believes will make money and shape the future of technology, the sheer audacity with which the crypto-Ponzi industry’s insiders pushed their agendas in recent years has been unbelievable. We have read the stories of a former Coinbase manager sentenced to two years in prison for front-running its users, and we know that Andreessen Horowitz (a16z), one of the largest VC firms in the space, has shilled Ponzi schemes like Helium.

The marketing approach a16z has had for its projects was summed up by Cory Klippsten:

“Most Bitcoiners that promote Bitcoin are just buying and holding as much as possible — and people who love it the most are the people who never sell. It’s kind of the exact opposite of what you see with the likes of a16z: full-frontal assault, marketing through all their channels, executing massive pumps after they bought a bunch of cheap Solana from the centralized team that controls it in the spring of 2021. They ⏤ and all their VC friends ⏤ were selling the top in late 2021, while claiming to the world that they were HODLing.”

‘Crypto’ Was Always A Cash Grab Disguised As Tech Innovation

Everyone who learns more about Bitcoin will soon realize that it isn’t perfect. The block size debate is, luckily, behind us, but full mempools and new things like the Ordinals protocol show that scalability is still a thing to be fully figured out. I believe that the Lightning Network, as well as similar solutions, offer a viable path toward secure, fast and affordable transactions, but we are not fully there yet.

Trying to improve the Bitcoin network is a noble cause, and if you feel that it can be done, giving it a try on your own is a legitimate thing to do. But the Bitcoin spinoffs we have seen over the years all failed, in terms of adoption, brand value and price. We know that ICOs in 2017 were largely cash grabs among retail investors, with little to no real innovation or market proof up until now. Hollow buzzwords like “blockchain” soon vanished, just to be replaced by an even vaguer concept of “Web3” in the wake of the COVID19 pandemic.

Play Stupid Games, Win Stupid Prizes

Today, there are thousands of crypto tokens out there, with a vast number of them created from the beginning as blatant Ponzi schemes without any long-term vision other than to benefit a small group of insiders. Honestly, I would have preferred to let the market decide their fate, and not regulators. But the reality is that the U.S. is now cracking down on them after the SEC failed miserably when it came to stopping people like former FTX CEO Sam Bankman-Fried.

SEC boss Gary Gensler recently made clear that bitcoin is a commodity and, therefore, doesn’t fall in the domain of his agency. And now, in the SEC’s lawsuit against Binance, the world’s largest crypto exchange, Gensler appears to be preparing to crack down on the crypto Ponzis, as it includes severe accusations against the company itself and also states that a range of crypto projects should be defined as securities. Those include big names, like Solana (SOL), Cardano (ADA) and Polygon (MATIC).

I don’t want to cheer for the SEC or any other regulator, because we all know that in the U.S., we barely managed to dodge a 30% energy tax on Bitcoin mining. And the powerful people who don’t want Bitcoin to win will find other angles through which to attack it. But at the same time, Bitcoiners had warned about FTX, Terra Luna and other shady crypto projects from day one. I’m sorry for every person who burned their fingers and lost money by trusting those criminals, but it’s also understandable that Bitcoiners are rightfully celebrating this “told you so” moment.

The Crypto-Securities Discussion Is Also Coming To Europe

Love it or hate it, the Market In Crypto-Assets (MiCA) regulation is the first comprehensive regulatory framework for cryptocurrencies in a major economic zone. Unless you think the free market should take care of scams and bad actors (which would be a fair point), you probably see MiCA as a step in the right direction. At least it’s a different approach than the “burn it all down” vibes we are getting from the Democratic Party, the SEC and other actors in the U.S.

But MiCA is the starting point rather than the end when it comes to trying to tame the “crypto Wild West” in Europe. A few days after signing MiCA into law in May 2023, a study published by non-other than the European Parliament came to the conclusion that MiCA needs to take further steps to really work. In fact, the study came to a similar conclusion as what we already see unfolding in the U.S.: It advises that lawmakers should take a closer look at things like DeFi, staking and NFTs. And, most importantly: All crypto assets should be treated as securities by default.

I think that, no matter what will happen in terms of regulation, it’s important to remember what makes Bitcoin unique and why we are here in the first place: It’s an asset you can really own, living on a network no one can shut down or control. This is it. As Adam Back recently said, Bitcoin is “antifragile” to regulatory pressures. And we can already see that this is the key difference between random crypto projects and Bitcoin.

Bitcoin Only And Non Custodial Are The Way Forward

Again: I’m not cheering for more regulation. I believe in the free market, and I think that with or without laws, bad actors will be flushed out eventually. On the other hand, I feel for everyone who gets scammed and loses money in shameless crypto scams. So, I also understand why some guardrails are needed, especially when bad faith actors are disguising themselves as “tech innovators.”

Companies that focus on Bitcoin and offer real, non-custodial BTC will thrive. Players who offer countless, shady Ponzi tokens to their (newbie) users will not only face regulatory scrutiny, but also lose the trust of their customers when tokens that were once promoted as “the next big things” start heading to zero amid harsher regulation.

Now, more than a decade after Satoshi Nakamoto invented true digital scarcity, the Bitcoin network stands stronger than ever as the one true cryptocurrency. An asset that can’t be diluted, can’t be easily changed and that doesn’t have a small group of founding insiders who dictate the rules. I don’t know what the future holds for Bitcoin, but I know that a lot of the things that Bitcoiners like me have been repeating about “crypto” and why Bitcoin is different rings true today more than ever.

This is a guest post by Julian Liniger. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.