We have within us the ability to generalize from a few bad examples. The ancient humans who didn't watch out for snakes or learn from someone else drowning are the ones who didn't survive. But this same instinct can cause people to over-generalize from disasters to see them around every corner. Whether that's exchange failures like FTX, Canada's own QuadrigaCX, or the many scams and disasters catalogued on web3isgoinggreat.com, it's easy to think that the crypto space is one big disaster. Many people hold this sentiment, and it's understandable. It's easy to take these disasters and translate them into the idea that the cryptocurrency space is opposed to the rule of law. I don't think that's correct.
Rule Of Law
The rule of law means different things to different people but it generally means that people are not beyond the law, that the law is some variety of fair, that the rules are knowable, the rules are reasonably consistent in application, and doing what you promised. The opposite of rule of law is rule of man, in which people with power simply do what they wish. Some academics note that there may not be too much distinction between these poles, but I think most people would disagree, particularly those who have experienced a lack of rule of law, in warzones or countries where courts essentially don't exist.
Honour And Business
Business has always attracted a bad reputation, if only due to the actions of scoundrels under the same banner as honest people. Overwhelmingly, business people are honest. Whether that's a local coffee shop owner, or a bank. The exceptions are numerous and well-publicized, but day-in-day-out, most businesses do almost all of their operations lawfully. Most businesspeople thrive in an environment of fair rules and cooperation. They want to serve customer needs and deliver good value. That is at the root of successful businesses because the business that doesn't serve its customers well is generally replaced by one that will. Small businesses in particularly tend to view this as a badge of honour. They do what they say, and they do it consistently. Everyone makes mistakes, and things go wrong, but 99/100, companies are following the law in Canada.
Bad Actors And Marketing
Unfortunately for the public, frauds spend a huge amount of money on ads. Google, Facebook, and others earn billions a year from advertising frauds and scams of various kinds. This gives a lot of exposure to bad brands, which then causes further negative sentiment to the industry that they ostensibly belong to. Few people realize that frauds can pay the most for ads, since they have a nearly 100% profit margin. So the public sees far more of scams than the scams merit on their own. People judge the cryptocurrency industry like it's their spam folder, rather than their inbox.
The Role Of Rule Of Law In Cryptocurrency
Although Bitcoin doesn't need the rule of law to survive (only power, computers, and inter-computer communications), most businesses do. Most customers want it. They want to hold businesses responsible for what they do, and the legal system is part of that answer. Programmatic rules help quite a lot, but ultimately, dealing with a business in a high trust jurisdiction like Canada in which the rule of law is reasonably strong, is an advantage.
In my experience, over nearly a decade of working with cryptocurrency entrepreneurs, the founders are trying to do the right thing. They abide by contracts (without going to court). They do what they promise. Very few companies in Canada are frauds or cheats. The ones who do engage in unlawful conduct cause a blowback to those who do abide by the rule of law.
Unfortunately, bad actors have resulted in many people having a negative opinion of the honest actors. This wouldn't be of much consequence if it didn't result in unfavourable laws, unfavourable banking, unfavourable press, and ultimately a lack of interest by developers in pushing the boundaries forward.
The Role Of Brands
If startups are unable to overcome the branding challenges they've experienced due to bad actors, perhaps the solution will be customers flocking to brands. That didn't work well with FTX, but certainly more sophisticated players have been flocking to platforms offered by major banks. DBS operates a Singapore-based private exchange that's reportedly booming. Silvergate, up until recently, operated a private crypto payment network used for billions a year in trading. The opportunities are out there, and are being proven by smaller players, perhaps to be replaced by trusted brands in the years to come.
Future Technical Developments
Perhaps more elements of the rule of law can be integrated into technology products directly. Like Bitcoin not needing courts, perhaps the DAOs and other innovations of the future will sidestep the rule of law. This would be a huge boon for people living in places that can't depend on it, and will enable lawyers and courts to concentrate on the more significant disputes.
Protocols, which is to say, technological tools for anyone to use, have been proven out by Bitcoin. It's a 24/7 alternative money system that's run with almost downtime for more than a decade. This is an amazing accomplishment, and it's done with 0 employees or managers. It was created and run by volunteers, and is now implemented and available through thousands of businesses worldwide. Payments work flawlessly without any approval process or error. That's the sort of accomplishment that fits the goals of rule of law, and makes it available for all.