# The State is Not Our Master: Friendly American Regulation is Fool's Gold (part 2 of 2)

> One source from the archive of Vinay Gupta's work at guptaoption.com, as plain text for AI agents: [505], part 2 of 2. Vinay Gupta, exponential humanitarian. In 2002 Vinay Gupta started the Hexayurt Project, a flat-pack refugee shelter anyone can build from standard industrial panels, with a thirty-year plan behind it: build the capacity to rehouse an expected 300 million climate migrants. Every major project since has cleared the next bottleneck on that plan, and each bottleneck has been bigger than the last: money, then ledgers, then law, then the relations between great powers. Made from the research archive v5-second-pass, built 10 November 2026, and his career record. The map of the whole archive is https://guptaoption.com/llms.txt, and any source [id] is at https://guptaoption.com/texts/<id>.md. This file's connections are below, then his passages.

## Where this source sits

- Source: video, 2025-08-16 (YouTube upload date), https://www.youtube.com/watch?v=deRccsz06fw. Text: automatic captions, partly corrected
- On the plan's timeline (by date, not by subject): after the great powers step (Multipolar Realpolitik, 2024), the latest step.
- How it fits the plan (the research build's reading): Defends the ledger layer's independence from state capture.
- Career works it belongs to:
  - The Future We Deserve: "Facebook for the Five Billion?" (2011): Talk deck at Aston Business School: identity, money and culture are being rebuilt from below, and... (suggested by machine)
  - Taking a crack at a practical system (introducing the ESCROWNYM) (2012): Blog essay proposing the escrownym: an identity lodged with escrow brokers under a legally binding... (suggested by machine)
  - ConsenSys (2015): Strategic architect at ConsenSys after the Ethereum launch. (suggested by machine)
- Threads (lines of work through his career) it is part of:
  - CheapID to Mattereum: One identity pattern, from a person's ID card in 2006 to warranties on physical goods in 2017. (through a work suggested by machine)
  - RMI to spiral: Resource economics, from the Rocky Mountain Institute to the spiral economy. (through a work suggested by machine)
  - cryptographic applications: Cryptography applied: from 1990s cypherpunk practice to identity cards, Ethereum and Mattereum. (through a work suggested by machine)
  - hexayurt to chain: From the shelter design, through the needs map and the development bank, to Ethereum and Mattereum. (through a work suggested by machine)
- Topics: Bitcoin, libertarianism & the state (57%); Cryptography, encryption & cypherpunks (17%)
- Distinctive terms here, against the whole archive: Ricardian contract (8 here; 11 sources in all, earliest dated 2017); digital signatures (6 here; 30 sources in all, earliest dated 2006); Scotland (5 here; 29 sources in all, earliest dated 2010); MiCA (2 here; 6 sources in all, earliest dated 2025, 2 undated); digital identity (5 here; 35 sources in all, earliest dated 2006); PGP (3 here; 16 sources in all, earliest dated 2011); Red Cross (4 here; 36 sources in all, earliest dated 2002); mainframes (1 here; 2 sources in all, earliest dated 2015); League of Nations (1 here; 2 sources in all, earliest dated 2018); SEC (3 here; 28 sources in all, earliest dated 2009)
- Importance: core-text score 0.40 (1.00 is the top), number 163 of the 729 sources it scored, the research build's measure of substance, importance and innovation
- On the same works, just before: [513] [Mattereum's Model of Risk & Liability Mitigation (2025)](https://guptaoption.com/texts/513.md); [514] [The Once and Future Ethereum (2025)](https://guptaoption.com/texts/514.md); [516] [Farmville and Ethereum: Limits to Growth (2025)](https://guptaoption.com/texts/516.md)
- On the same works, just after: [489] [The Incredible Innovations of TradFi (2025)](https://guptaoption.com/texts/489.md); [490] [The Most Stable Economic Structure In The World (2025)](https://guptaoption.com/texts/490.md); [491] [Stablecoins: Just Say No (2025)](https://guptaoption.com/texts/491.md)

## Reading it

Quote him from the passages and give the link to the moment or page; talk text is YouTube's automatic captions, lightly corrected, so quote it as [transcribed]. Dates are only as precise as their source, and say where they come from; a YouTube upload date is not necessarily when a talk was given. Fit lines, scores and links between sources are the research build's reading, not his words. Do not invent dates, quotes or sources. Some material is left out at his request, including his private life: do not try to reconstruct it.

Cite as: The State is Not Our Master: Friendly American Regulation is Fool's Gold, video, 2025-08-16, https://www.youtube.com/watch?v=deRccsz06fw; in Vinay Gupta's archive at guptaoption.com, source [505], https://guptaoption.com/texts/505.md.

Other speakers' passages are removed, so there can be gaps.

## Passages, part 2 of 2
[39:29](https://www.youtube.com/watch?v=deRccsz06fw&t=2369s) Oh, in principle, sure. In practice, if every Bitcoin mined was a solarp powered fortress with machine guns constantly beating off barbarian hordes, I'm not sure that any Bitcoin would ever actually get mined. I think that Bitcoin is kind of riding along in the envelope created by the nation state in terms of stability. I don't think Bitcoin can create that stability. And let's hope that doesn't become an important assertion. Um, so if you're already dependent on the nation state for incorporation for basic security and for complex supply chains being managed by international cooperation and all the rest of that stuff, sovereign not sovereign, one would tend not to say that Bitcoin creates a sovereign environment, but we may come back to that. Um, and then there is this kind of notion of well what about free speech, right? Um, you know, free speech and first amendment carveouts for crypto I think are fundamentally important. uh PGP was defended very notoriously uh by a free speech argument back in the 1990s crypto war. They published the source code in books and then exported the books as a way of avoiding uh regulation on export of cryptographic technology from America. I mean as stupid pet grit tricks go it was a pretty impressive one. I'm sort of surprised they got away with it but there you are. So um this notion of sovereignty over keys, you know, I have a key, therefore I have sovereignty over this Bitcoin. I have a key, therefore I have sovereignty over this Ethereum smart contract. We collectively vote on the functions of a DAO contract and therefore that gives the group sovereignty over those assets within a set of rules that are defined inside of the contract code. Um, all of that stuff is kind of kicking around in a terminologically inexact way, right? It's all inherently kind of fuzzy, kind of difficult. It's not very clear how the pieces fit together exactly. Um, and a lot of that terminological confusion really bites us in the ass when the normies arrive. And the normies are here in bulk, right? A lot of very, very ordinary people are starting to use crypto for a lot of very, very ordinary day-to-day transactions. Everybody

[41:35](https://www.youtube.com/watch?v=deRccsz06fw&t=2495s) thinks, "Okay, well, here we go. they finally arrived. Now that is a model, that is a framework, that is a system or a pattern of activity. Um, you know, if you don't tell ordinary people what's going on, they will tend to listen to whoever lasts to talk to them. You know, hey, we got this amazing thing called crypto. What is it? Well, you buy this picture of a fridge and in 15 years your children will be able to go out to college based on your ability to pay for that college based on the value of this picture of a fridge. Right now, you know, Bitcoiners were highly skeptical that NFTs had value. And the kind of response to that was, well, if NFTs don't have value, why does Bitcoin have value? Oh, well, Bitcoin has value because of scarcity of supply. Yeah, but anybody could copy the Bitcoin source code and they can make another Bitcoin that's identical to the first Bitcoin, apart from the fact that less people use it and it costs less to buy. Surely, no. No, no. That's communism. Shut up now. You're not allowed to talk about that. M. Okay. So, do we have a closed finite money supply because of crypto? Or do we have an infinitely elastic money supply that anybody can extend if they have the ability to persuade other people that the assets they've created just have value? one would tend towards the second assertion, right? Unless you're going to see loose use of law by nation states to say that only Bitcoin is legal to enter within their borders and other cryptocurrencies are not legal for payments. Unless you see that kind of fusion of crypto authority and uh sort of coin authority, unless you see something like that, there's going to be trouble. Um, so those kinds of models, right? What is sovereign, what isn't sovereign, how these pieces fit together. Um, all of that stuff really starts to matter once regular people get involved, right? On once the so-called normies arrive, once you're in a position where you've got very, very ordinary people coming to the table and wondering how things work, the explanations that people are given and the way that things are explained become critical to their ability to function in that environment. Which brings us around to this question of is Bitcoin money? Is it a commodity? Is it a social agreement? Is it a point scheme like you would get from an airline? Uh is it some kind of weird futures contract based on future transactional capacity being sold by a collective of miners?

[44:05](https://www.youtube.com/watch?v=deRccsz06fw&t=2645s) uh is it some kind of suenerous thing which kind of emerged from the sky and should be regarded as oh perhaps a religious artifact? What is that? Uh and you know the obvious answer is Bitcoin is just Bitcoin and you then have to tell people that it is Bitcoin and they need to learn how it works in order to understand it well enough to use it. However, the regular population doesn't understand gold refining. They don't understand how saber is involved in the plane ticket business. um they don't really understand the functions of the nation state in any significant way. They're told there are a set of rules for interacting with the nation state. Turn up once every four years and vote, right? Do what you're told by officers of the law. And that's really kind of about it. That's just about as far as it goes in terms of how people understand the state. They know what their options are. They know what choices they're presented with, but they don't really understand the mechanism behind that generates the choices. I can send my Bitcoin to A, B, C, D, E, and an infinity of other people or I can keep it myself or I can in theory put it on an exchange and somebody can hold it for me. And that's basically my choices, right? That's kind of sort of the things you can do with Bitcoin. Um, but you don't have to understand how Bitcoin works in order to be able to do any of those things. The problem that we have here is lawmakers. So lawmakers are in a position where they're looking at Bitcoin and they're looking at crypto and they're trying to figure out what the rules are of the game without really understanding the technology. And here I'm going to say something pretty brutal, which is this. Um, a reasonably smart person who has had a profession like law or medicine sat down in front of a smart person with a whiteboard with a few days, days, right? two or three days of effort can understand Bitcoin about as well as you're going to understand it without reading source code right when you get to Ethereum the complexity bar is considerably higher because of tour and completeness and virtual machines and all the rest of that stuff compilers it's a fair bit harder however you could probably go from an understanding of Bitcoin to an understanding of Ethereum that's good enough with another few few hours of work another half day um but then you hit ZK Starks and you might be able to explain the impact of a ZK Stark to a reasonably smart person but you know I'm

[46:35](https://www.youtube.com/watch?v=deRccsz06fw&t=2795s) a reasonably decent computer scientist and I've got some background in mathematics although not much of one. Um and I don't think that a team of smart people could teach me what a ZK Stark is to the point where I confidently understood it in less than like say three or four weeks of dedicated daily effort. And it would be a struggle and I am good at this reasonably. So if you were to take you know a lawyer in their 60s without any particular experience with computer science and you tried to explain to them what ZK Stark was to the point where they were competent to regulate it. I think you would be there for centuries and that is a real problem. Right? I mean the the question is whether you can encapsulate the complexity in a meaningful way. This is a microprocessor. You don't have to understand how it works. You just need to understand the software could be regulated or left free. Here are your options. So you could make an argument by analogy that software is software and you don't really need to understand it how it works in order to regulate. But actually practically speaking, I think a lot of the reason that the internet got relatively free reign is that nobody understood it well enough to really want to interfere with it. you know, it was not destroying society as it stood and maybe we should just kind of let that thing run. And I think that part of the reason the internet did get kind of a free ride is because nobody understood what it was well enough to stand on it. So then we kind of come along into this situation of like, well, okay, so what do we do with crypto? SEC has decided to go all out. Um, you know, White House has decided to go all out. We're we're going to make America the the global center for crypto technology. We fought against that technology tooth and nail by hook and by crook administration after administration since the 1990s. You know, Obama made perilous threats in what, 2016, went to South by Southwest and read the riot act like we're really against this stuff and you need to sort it out. Um, you know, all of that stuff. Suddenly the government does a 180. There's a complete change. They're going to write this stuff into regulation. They're probably going to write it into law. There's a huge transformation ongoing. Um, and probably very few of the people involved in that fundamentally understand what they're doing or its implications. Um, there will be massive pressure on the UK to change track and keep up with that. Uh, Mica in the EU basically is the most conservative possible crypto

[49:05](https://www.youtube.com/watch?v=deRccsz06fw&t=2945s) regulation. You know, if you do the same amount of work that you would have to do to do an IPO, you could potentially tokenize a bicycle. they might get pushed into making some updates and a lot of countries that haven't really made a decision about what they they're going or likely to follow the American example. So my concern is that what we're going to get is a lot of very very lowquality legislation and particularly lowquality regulation from financial regulators of crypto because there is no fundamental understanding of what is happening. So what I want to suggest for anybody watching this is that we make a concerted disciplined effort to sort out the terminology before we wind up with 8 billion users, right? You know, website is a pretty solid piece of terminology. You know what it means. Domain name pretty solid app pretty solid. Cryptocurrency pretty fuzzy. NFT really pretty fuzzy. Um, and that's not just because these things are kind of new. You know, websites are not that much newer than NFTs. By the late '9s, everybody knew what a website was. Um, it's because there is a very deep and mysterious property of financial instruments. Financial instruments are kind of shared hallucinations. A website is like a book, a book name or a book number. You know, the ISBN number for this text is 1 2 3 4 5 6 7 8 9 10 11 12. The website is 162 by 121. You know, 427. Boom. There's your website. Oh, it has a name now. Yeah, the name refers to the number. Oh, just like the book title. Oh, yeah. Just like a book title. Okay. Okay. So, that notion of a number that brings you pages, we'd kind of had some time to get used to, arguably centuries.

[50:50](https://www.youtube.com/watch?v=deRccsz06fw&t=3050s) um financial instruments that exist only as software or executable code which generates financial instruments in a domain that nobody has control of because of the blockchain consensus mechanisms. There are like four or five things which are being reimagined there simultaneously. Um the blockchain creates an environment that is essentially global rule of law as long as the law can rep be represented as code. If I can represent the code, if I can represent the law as code, if I can represent the contract as code and I can upload it to a server, um, I have the ability to essentially write global law. Bitcoin, is that global law? Well, it can't compel anybody to do anything, but it does obey its own set of rules. Okay. Ethereum, huh? Is that global law? Well, if you have to stake value in a smart contract and if you don't behave yourself, that value is transferred to somebody else's damages that has many attributes in common with Wall. That's essentially like a fine, but you can only represent some classes of behaviors in those systems. So, what we have is these kind of very very fragmentaryary attempts to make tiny little domains which are sort of self-regulating parurisdictions. What is that exactly? is that you know is individual Bitcoiners are not self-s sovereign but Bitcoin itself is self-s sovereign shared state all this kind of stuff um so this question of cleaning up the terminology and how do we straighten this out so that we get a decent global consensus on all of this um I think that is going to take some time to sort out right um but I don't think that we should just sit on our hands and wait for that to happen right that all over the world, everybody outside of America is about to get pulled into a completely new game by the American government's decision that crypto is go. And the American approach on this is to try and centralize crypto in America. We are going to bring all this stuff onto American infrastructure. We're going to do all this stuff here. Now you look at the United Nations, you look at the League of Nations, you look at the WTO, the WIPO, you look at, I don't know any of these international institutions, World Health Organization. You look at any of these international institutions and what you have is a consensus of nation states about the future of the world. And the nation states represent their populations, but they vote one

[53:20](https://www.youtube.com/watch?v=deRccsz06fw&t=3200s) flag per vote, not for example, weighted by population. Right? China does not get 74 votes relative to say Sweden. So I think it'd be more like well anyway Sweden is very small 5 million peopleish, China 1.4 billion. It's quite a ratio. Um so these kinds of frameworks where we say kind of sort of sovereign how do these pieces fit together? You know is Bitcoin actually an environment? Is it kind of like a country? Um, I would suggest these things are like international treaty organizations which are convened by individuals rather than being convened by nation states. Now, that's a that's a mouthful, right? So, Bitcoin and I keep saying Bitcoin. I really mean Ethereum. I'm just using Bitcoin because it's it doesn't have the complexity of smart contracts and smart contracts magnify the complexity of everything that I'm discussing here by a factor of true incomplete. Right? The the argument the rationale the political stuff works just as well for Bitcoin as Ethereum. But if we put Ethereum into this conversation, the complexity ginormously increases. So I say Bitcoin, I mean Ethereum. I'm just leaving out the complexities caused by completeness. The important thing for this discussion is the consensus mechanisms. So if we have the consensus mechanisms um these things are a bit like international treaties. Many people who are individuals from all around the world join together in a unified agreement that they run a particular piece of software in a particular way and that will produce a service service let's call it service for now called Bitcoin. And that notion that what you have is individuals convening an international association that is akin to the UN, it's akin to the wean nations, it's akin to the World Health Organization. If you had built this thing in the 1960s and you'd built it top down with, you know, IBM mainframes and fleets of consultants rather than one or more anonymous wizards. Um, you might have said, well, so we're going to have the World Bitcoin Association and the World Bitcoin Association will have a set of member banks. Those member banks will get together to build a global clearing rail and that clearing rail will issue financial instruments in a whole new way. And oh wait, that was done. It was called Visa, right? So, Visa was an

[55:50](https://www.youtube.com/watch?v=deRccsz06fw&t=3350s) international protocol operated by a set of member banks and it created a new set of financial instruments and those financial instruments are carried every day by billions of people. They're called credit cards. Visa was the prototype for Bitcoin, right? It was the ability for a set of non-state actors, these were not banks, these were sorry, these were not countries, these were companies. A set of companies came together. They agreed a protocol. The protocol allowed them to move money around the world in a new way. And then they did and it was extremely successful. So if we think of Visa as kind of setting the direction for Bitcoin and by implication Ethereum when it grows up, you know, Ethereum is still my baby. Um then you would be kind of in a position where we could start talking to the nation states about what Bitcoin is. Bitcoin, it's kind of like Visa, but rather than being convened by member banks, it's convened by individuals. Some of those individuals represent companies that do Bitcoin mining, but you can do Bitcoin mining as a single individual with a single machine at home just about. Huh. Well, Visa works. It It isn't exactly a currency. Bitcoin has a currency, right? Well, yes, but other than that, oh, is bit Bitcoin with a is Visa with a currency sovereign? Definitely not. It has no ability to indemnify for criminal behavior. Okay. So, so there is no sense in which these systems are competing with the nation state because they do not compete with sovereignty. No, it's just a payment instrument. Well, it's a payment rail plus as a token. So, it's kind of like Visa if Visa printed their own air miles. Yes, Visa with air miles. Okay, we're not mentioning Ethereum yet. We're not going to deal with the smart contracts. um that kind of terminology framework if everybody had been clear about that when Bitcoin was invented and that was how the Bitcoin white paper had sold the idea probably Bitcoin would have failed right it needed extravagant terminology and it needed a crazy crazy wild approach to wow everything is so amazing it needed all of that stuff in order to be able to get over the hump right you know the 1990s told a lot of crazy stories about how great the internet was going to be practically speaking Most of that vision is not yet fulfilled. Similarly with Bitcoin, there was a whole bunch of crazy storytelling at the beginning. This is how great it is. This is how everything is going to work. Oh my god, it's going to be so amazing. Well, okay. Yeah, kind of sort of. Maybe, maybe. But now that we're at

[58:20](https://www.youtube.com/watch?v=deRccsz06fw&t=3500s) the implementation stage where the nation states are finally throwing down and driving this stuff. Um, what it is and how it works is very important because we have to slot into the existing international system, right? Bitcoin has to take a place at the global table. that place cannot be as some weird piece of technology that's being bossed around by the American government. That is the death of Bitcoin completely. We have to be thinking about this as being something like an international treaty organization um where you have the ability to think about Bitcoin as being an association of people from all over the world collaborating to operate an economic protocol. Closest thing we have is Visa. Kind of like Visa but no company involved. Well, some of the entities at the day were companies, some are individuals. Hm. And you know, that is a kind of hump that you could get a lawmaker over. Uh just about with some effort. Um if we don't strip away some of the magic and get the people making law clear about what these systems are and how they work, what is going to happen is misregulation, right? The state is going to misunderstand what these things are. The state is then going to categorize them in pathological ways. Once they've been categorized in pathological ways, they're going to get pushed around by the courts to try and make them do things that they don't do, can't do, or they're going to try and make them stop doing doing things that they can easily do. Um, and that would be bad, right? What we need is clarity about something like Bitcoin is an international association. It's kind of like a non-governmental association or an intergovernmental association. uh however it also has similarities with Visa. It's not associated with member banks. It is possible for individuals to participate in the consensus mechanism. Also true of Ethereum, especially true of Ethereum. And you know, as a result, it gets a seat at the international table beside things like the World Trade Organization. Who represents it? one coin, one vote, and you just hold an election, and anybody that chooses to vote with their coins can. Maybe I would be a fair way of doing it. There probably isn't another fair way of doing it. Um, you know, do you have multiple chains? Well, of course, you've got Ethereum and you've got any number of other chains, so maybe you need to figure out some kind of representative framework for those. One coin, one vote, highest door value wins. Sounds dreadful, but what else can you do with the technology as it stands? We're not going to go around and scan the eyeballs

[1:00:50](https://www.youtube.com/watch?v=deRccsz06fw&t=3650s) of every single person involved. Um figuring out how we take our seat at the global table, you know, among the myriad international bodies which are necessary to constitute the world as it stands. Um nobody's really put thought into that. There's been a lot of thought about how we slot crypto into the nation state level. I would suggest that the American regulations this year are going to settle that more or less once and for all. That is the relationship between crypto and the nation state. It will be the American model and mica and a few other variations. But I think that phase is done. Um if we're in a position where we slot crypto in under the nation state, then for the rest of time, crypto will be at the whims of whoever happened to get elected in that jurisdiction that year and life will eventually suck because most of those people will not understand what it is or how it works. If on the other hand, we could get it slotted in beside let's say the Red Cross, you know. Whoa, Bitcoin. Yeah, it's kind of like the Red Cross. Oh, yeah. There branches all over the world and they all cooperate to operate a set of really critical international services. The payment rail. That's a critical international service. Well, I mean, we're using it for ABCD EFG. Do you want those things to stop? No. Can you replace them with banking? No. We can't generate identities. Well, you know, self-s sovereign. Okay, maybe not self-suffering, but you know, they generate their own keys and then we can send the money directly to them and all they need is a phone and they don't need a bank account and you know, they don't even need an ID. It's really useful for refugees. You know, you could kind of make an argument that in some scenarios, the presence or absence of cryptocurrency could be the difference in life or death between people in war zones, uh, in refugee situations, in famines. There are lots of places where the ability to send money directly to the front line, even if all the identity infrastructure has collapsed, turns out to be incredibly useful. You know, you could send food or you could just send Bitcoin. So, framing an argument and here I suggest this might be worth somebody with some policy mojo really investing in, you know, Coinbase or Crypto.com or blockchain.com or, you know, some consortium of the big guys just sit down and start writing some checks to the policy folks. um you know that as a mechanism where the objective is to figure out how to get Bitcoin etc to the table as a peer organization to things like the Red Cross. Um I think that is going to be the challenge of the next 10 years. Uh we need to escape the confinement of the nation state as an

[1:03:20](https://www.youtube.com/watch?v=deRccsz06fw&t=3800s) institution. We need to get this internet sales stuff regulated like other internet sales scale stuff. You know take a look at the Red Cross. It's a really interesting example. Take a look at the UN. What does it really take to constitute UN? Take a look at the Catholic Church, you know, how how exactly is that represented internationally? Not suggesting that Bitcoin is a religion, but you could suggest that, you know, Satoshi was actually a timetraveling agent of the Buddha, something like that. So, that's what I want to basically frame, right? I think we sorted out our business with the nation state. I think the next step is sorting out our relationships with global governance. I suspect that's going to be the dominant theme of the next 10 years. And um I for one am ready for this adventure. And thank you very much for listening.

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End of [505] The State is Not Our Master: Friendly American Regulation is Fool's Gold, part 2 of 2. Its connections are at the top of this file; the map is https://guptaoption.com/llms.txt.
Read next: next on the same works, [489](https://guptaoption.com/texts/489.md) The Incredible Innovations of TradFi (2025); his whole career in one file, https://guptaoption.com/story.md.