Crypto on the Way to Mainstream Acceptance?

The crypto world may be on the verge of its final acceptance. Bitcoin, the first and still the most significant cryptocurrency, recently reached a new all-time high. Simultaneously, the U.S. Securities and Exchange Commission (SEC) eased rules significantly facilitating investments in cryptocurrencies. Donald Trump announced his intention to make the United States the "crypto capital of the planet," while a Republican-sponsored bill in the Senate calls for the U.S. central bank to invest billions in Bitcoin. Kamala Harris is also reportedly more open to the potential of cryptocurrencies than President Biden. These developments could indicate that the crypto world wants to leave behind its scandals and shady image as a playground for fraudsters and financial charlatans. Perhaps it will finally displace traditional banks and return power to users by making basic financial products and services more accessible, increasing competition, and improving resilience. Or not. The newly rekindled love of politicians for cryptocurrencies may have more to do with a cynical attempt to attract young voters and secure funding from Silicon Valley than with the maturation of a financially risky asset. In fact, crypto might present even greater risks for investors and financial institutions today than before. The Republican Party's public celebration of cryptocurrencies to American voters could exacerbate the situation. I am not an eternal crypto skeptic. As the author of a book on digital currencies, I can confirm that Bitcoin has remarkable creative concepts and innovative technologies behind it. Bitcoin and other cryptocurrencies are fundamentally decentralized, meaning they are not issued or managed by institutions or authorities. Since digital transaction records are maintained worldwide on a computer network, cryptocurrencies are theoretically secure, resistant to manipulation by a small group, and resilient to failures. Theoretically, they could eliminate the need for trusted intermediaries like commercial banks, which often use their power to limit competition and restrict broad access to financial products and services. Unfortunately, some of these advantages were lost when cryptocurrencies became popular, and speculative forces seeking quick profits took over. A major paradox of the crypto world is that there is now enormous centralization in this unregulated ecosystem. Apparently, most users do not fully trust the "trustless" technology and rely on crypto exchanges to hold and trade their crypto assets. The fraud committed by Sam Bankman-Fried's FTX, where executives treated investor funds like their personal piggy bank, highlights this vulnerability. The federal charges against Binance, the world's largest cryptocurrency exchange, for money laundering and other misconduct, show how the problems of concentrated market power can taint the noble goals of crypto visionaries. Despite the issues illustrated by FTX and Binance, regulation is patchy, and centralization remains pervasive. The process by which transactions are validated and recorded on Bitcoin's digital ledgers is controlled by a handful of significant consortia that use their computing power to enable this process and reap the rewards. And in other parts of the crypto world, true democracy only goes so far: Large stakeholders have been accused of trying to manipulate rules based on majority power to their advantage, to the detriment of smaller players.