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Dear Crypto Natives,

When crypto faces its final boss I think crypto wins.

Let me tell you why.

But first let’s set the stage.

Crypto is Mario. He’s on a quest to save the world’s money system from Bowser the nation state. Bowser kidnapped the money system. At first his intentions were good, but the power corrupted him. Now he’s enslaved koopas and corrupted the land with ghost castles and lava traps.

Mario has to battle Bowser’s minions across the land—the SEC, FinCen, the IMF, the PBOC—Bowser has many lieutenants. And every once in a while Bowser pops up to fight him directly.

I tweeted this when I read the Financial Stability Board paper last week:

Now let’s be clear so people don’t go overboard on this: a stablecoin ban by central bankers isn’t imminent. The paper was a set of recommendations—not policy. And the large bulk of recommendations in this paper concerned properly regulating bank stablecoins—not banning them.

But the recommendations also included things like this:

Ability to require a GSC arrangement to be governed in a manner that facilitates effective regulation and supervision, including by prohibiting fully decentralised systems.

Prohibiting fully decentralised systems like Ethereum, DAI, or Bitcoin. Wow.

It’s an option on the table.

If a group of bankers some day decide these decentralized systems will lead to a loss of control—or in more Orwellian speak—if these bankless systems start to “negatively impact the world’s financial stability”….well what would you expect them to do?

For now Bowser has bigger problems. A kingdom to run. He can ignore Mario for now.

But what do you expect him to do if Mario becomes a threat?

Exactly what he’s done in the past. He’ll attack the threat.

Why Bowser won’t win

Some people will tell you Bowser won’t win because he can’t possibly stop a system as decentralized as Bitcoin or Ethereum. Seems naive. Motivated nation-states are really good at finding weak links and exploiting them, remember Stuxnet?

They could choke liquidity. Make holding illegal. Attack the social layer.

Or maybe they just come up with an alternative they can control—that’s what China’s doing through its national blockchain and digital currency. It’s also what the west is going to attempt too.

But even with all this firepower I still think nation states can’t win.

Why? Because there’s not just one Bowser.

There’s many. And each of them are playing a competitive game with each of the others. They’re fighting for resources, GDP, status, power. They’re uncoordinated.

If they band together surely they could squelch crypto.

But what if one breaks rank and adopts crypto?

What if a Bowser teams up with Mario?

If you’re a nation state that bans crypto you disadvantage yourself relative to other nation-states that adopt it. You kill your prospects. You can’t afford to miss out on this new value transfer & capital coordination protocol—it’d be like missing out on capitalism or the internet.

So what’s does the game theory force competitive nations to do? To adopt crypto.

Not right away.

At first they’ll try to replicate networks like Ethereum inside walled gardens they can control. But then they’ll end up settling on the networks like Ethereum for the same reason—because none of them can control it.

Sure he’ll pop his head up from time to time but I’m not worried about the final boss.

In the long-run Mario wins.

- RSA

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