Dr. Craig S. Wright is seeking to clarify use of the name “Bitcoin,” settling the issue once and for all with a legally-binding court order. A new intellectual property lawsuit makes claims against cryptocurrency exchanges Kraken and Coinbase, accusing them of “passing off” BTC as “Bitcoin” to their customers. Notably, these two exchanges have played a part in previous attempts to ruin BSV in the market. Kraken joined others in delisting the BSV asset from their trading platforms in 2019, while Coinbase decided to stop listing Bitcoin and gave its BTC ticker symbol to the new system that was created by BTC protocol engineers in 2017.
Although the BSV blockchain is the only network still running on Satoshi Nakamoto’s original Bitcoin protocol, “Bitcoin” in the eyes of the confused public and mainstream media usually refers to the BTC network. Dr. Wright says this is industry representatives “passing off” BTC as “Bitcoin,” when in fact (since 2017) the “BTC” ticker symbol represents a new asset and system altogether, and not Bitcoin at all.
Dr. Wright has launched the suits as an individual, and as a representative of his companies Wright International Investments Limited, and Wright International Investments UK Limited.
If successful, the suits could change the nature of the Bitcoin industry in radical ways, and formally recognize BSV (and only BSV) as “Bitcoin”—including use of Bitcoin-related signs and wording. The move would also mark a deep psychological shift, given that Kraken in particular has been at the forefront of the anti-BSV push at times in the past.
So why have Kraken, its friends, insiders, operators and investors, taken such an approach? The answers lie partly in ideology, and partly in the pursuit of financial returns.
A brief background of Kraken and Bitcoin
Kraken was conceived in 2011 after founder Jesse Powell visited his childhood friend Roger Ver in Tokyo, to deal with the aftermath of an early security breach at Mt. Gox. At the time, Gox was the only Bitcoin/fiat exchange platform with enough liquidity to be useful although it wasn’t the only platform or even the first exchange to trade Bitcoin, and Powell realized there needed to be an alternative if Mt. Gox ever fell apart—which, as Powell and many others predicted, it eventually did.
Ver was an early investor in Kraken, participating in parent company Payward, Inc’s seed funding raise of $1.5 million. Other investors over the years include the MasterCard backed Digital Currency Group, Crypto Currency Partners (later Blockchain Capital), Money Partners Group, Mindrock Capital, Hummingbird Ventures, Trammell Ventures, Trace Mayer, Meni Rosenfeld, Ben Davenport, Pamir Gelenbe, Kevin Bombino and Jimmy Furland.
The company originally served mostly non-U.S. markets, focusing on the Eurozone and Japan. It eventually set up shop in California, and is these days one of the most popular and best-known USD trading platforms. In 2020 it received a banking charter in Wyoming under that state’s special purpose depository institution (SPDI) rules, and is reportedly looking to go public with a valuation of US$20 billion.
There have been a few hiccups along the way, due in part to Powell’s public opposition to restrictive regulation. Kraken also settled with the CFTC in 2021 on a US$1.25 million penalty for offering illegal margin trading to inexperienced investors, and in 2019 faced breach of contract lawsuits from a number of former employees.
Kraken’s turbulent relationship with BSV
Kraken, along with two other Roger Ver backed digital currency exchanges (Binance and ShapeShift) and Bittylicious, announced they would delist BSV from their trading platforms in April 2019. They did so after briefly “consulting” with users on the matter via Twitter, and the campaign even came with its own #delistBSV hashtag.
Kraken posted on its blog:
“Over the last few months, the team behind Bitcoin SV have engaged in behaviour completely antithetical to everything we at Kraken and the wider crypto community stands for. It started with fraudulent claims, escalating to threats and legal action, with the BSV team suing a number of people speaking out against them. The threats made last week to individual members of the community were the last straw.”
“This aggression will not stand. Alongside other upstanding members of the community, and in consultation with more than 70,000 Kraken users, we have decided to delist Bitcoin SV.”
Delisting a digital asset due to (claimed) moral objections over one person’s actions is unprecedented in the history of Bitcoin and blockchain. It would be a highly questionable, if not illegal, move in the wider asset-trading world. In a way, it was a far smaller-scale version of the U.S. and its allies attempting to isolate the entire country of Russia, its currency, resources and people, international markets in 2022.
Kraken’s announcement also referred to “the team behind BSV” as the source of its objections. In reality, it was personal defamation actions launched by Dr. Craig S. Wright to defend his professional reputation that drew the exchange group’s ire, not anything involving the BSV development team.
If the BSV team has made any “fraudulent claims,” as Kraken also referenced, then no one has been able to prove this either in or out of a court. They couldn’t prove it in 2019, and they’re still unable to prove it in 2022. Consequently, their tactic has been to simply keep repeating the accusation without it having any basis in fact or reality.
As Powell himself said at the time: “In this case, it is a unique case for us, we haven’t delisted any other coins because the founders, people who are promoting it turned out to be total assholes.”
That statement is telling. After years of fairly regular backroom dealings, nepotism, payola, hacks, and other ethically questionable behavior in the wider blockchain industry, only BSV was targeted for delisting. As for the reference to “other upstanding members of the community” in a group that includes Binance and Tether, we’ll just leave that without comment.
That the delisting happened in tandem with other large digital asset exchanges also suggests there was some behind-the-scenes collaboration by actors and insiders opposed to Dr. Craig Wright and Bitcoin. Social networks and app stores have shown similar behavior when joining together to “cancel” specific people from the internet at the same time—moves that have also proven controversial and drawn criticism.
— CZ 🔶 Binance (@cz_binance) April 15, 2019
Moves to delist and discredit both BSV and Dr. Wright are often attributed to BTC maximalism and the powerful interests driving that phenomenon. However, it’s important to note that Kraken and Binance still list BCH—which remains in the “top 10” digital assets by market cap, and presents the most publicly-visible threat to BTC, since it’s BSV that runs on Bitcoin’s original protocol and rightfully claims the name.
Monero, whose anarchist founder Riccardo Spagni (aka “Fluffypony“) has been arrested on charges related to fraud, hasn’t been delisted. Roger Ver has been open about his 2002 felony conviction and prison time for dealing in, and storing, agricultural explosives without a license yet his BCH token is still listed on Kraken. There are several other coins whose founders and executives have been indicted on fraud charges, without their associated assets being removed from any markets.
BSV may not be a household name yet, but it represents the greatest legal threat to BTC and BCH, their use of the name “Bitcoin,” and their investors’ net worth. At the end of the day, that could be the threat that matters. Dr. Wright aims to prove himself once again to be “Satoshi Nakamoto” in a court of law (he already has proven he is Satoshi Nakamoto in the Kleiman v Wright trial last year), and/or prove he owns the intellectual property that covers the Bitcoin transaction database and several fundamental blockchain-related processes. It’s also why Kraken have teamed up with Brian Armstrong’s Coinbase (NASDAQ: COIN), Jack Dorsey’s Block (NYSE: SQ), Michael Saylor’s MicroStrategy (NASDAQ: MSTR), Mark Zuckerberg’s Meta (NASDAQ: FB), Adam Back’s Blockstream and several other companies in the Crypto Open Patent Alliance (COPA) to go after Dr. Wright’s copyright ownership of the Bitcoin white paper.
If and when that happens, it will matter more to Bitcoin and blockchain than BSV’s market cap does. Ergo, there has been a campaign to publicly discredit Dr. Wright and his work, building up a public record of media material his opponents can reference before a judge in the future. The name “BSV” is comically omitted from blockchain news articles, even where it’s relevant to the story. Those that mention Dr. Wright only do so when referring to his legal challenges.
The delist, or “cancel” campaign against BSV is strong enough to suggest power players in Big Tech and the blockchain industry think of Dr. Wright often and clearly consider him an existential threat. If he were not, BSV might stay in the background or disappear forever thanks to ordinary market forces. Instead the biggest names in Silicon Valley are aligned with the biggest names in cryptocurrency to execute a commercial attack against Bitcoin and its creator Dr. Craig Wright.
Exchanges’ attitudes towards regulation
The biggest names participating in the “delist BSV” campaign were Kraken, Binance and ShapeShift all of which have Roger Ver as an early seed round investor and/or informal advisor. The three exchanges have at various times “poked the bear” of regulation with their respective founders (“OG” Bitcoiners Powell, Changpeng Zhao and Erik Voorhees) expressing public opposition to lawmakers’ efforts to make cryptocurrency exchanges toe the same line as other trading platforms.
Binance is famous for its ambiguity regarding the location of its “official” headquarters, adopting an internationalist approach consisting of multiple independent local operations. Each of these operations fully complies with local laws where they operate, the company has said. Recently, it appears Kraken is following a similar strategy. Though headquartered for years in San Francisco (after opposing New York’s “BitLicense” legislation), Kraken last month reportedly shut down its Market Street office, claiming the area was too dangerous for employees.
Kraken was once big in Japan, opening one of the first digital asset exchanges there in the wake of Mt Gox’s collapse. It even became the darling of Japanese lawmakers for a while by officially handling accounts to return funds to Mt. Gox’s creditors on behalf of bankruptcy trustee Nobuaki Kobayashi. That deal eventually ended, with Powell showing frustration at delays in the process and ever-more-restrictive consumer protection focused and sensible regulation in Japan, and Kraken left the Japanese market all together.
Yes, Kraken is right when it stated that Bitcoin is antithetical; but that’s why Bitcoin—the original Bitcoin (BSV) that follows the Satoshi white paper—is pushing for a legal system that is regulated and within the law, without room for fraud and scammers.
I cycled through multiple rented PayPal accounts and I started spreading deposits across several banks, cash in safety deposit boxes. Probably a compliance person’s worst nightmare but I basically had to employ the arts of a money launderer to survive.
— Jesse Powell (@jespow) January 9, 2019
Meanwhile, after admitting publicly that he laundered money while operating Kraken, Powell has continued to be vocal on the topic of digital asset regulation, and raised the ire of Canadian authorities in February 2022 with tweets opposing the federal government’s moves to freeze bank and trading accounts associated with far-right activists and separatists disrupting commerce.
These criticisms do have some legitimacy, given governments’ tendency to overreach once basic regulations are in place. Powell and Voorhees are part of Bitcoin’s original anarchist set, who believe unregulated markets are necessary to generate value, so they are at least acting consistent in regards to their personal anti-government ideology.
The question is: These days, are they seeking to remove restrictions on digital asset and “cryptocurrency” use itself? Or are they more interested in using digital assets as a medium through which to run unregulated trading houses and make fiat profits? They have all been far more vocal in opposition to governments, than towards Bitcoin developers who restricted BTC’s usefulness as money.
And how did opposition to government overreach morph into fierce opposition to BSV? BSV encourages compliance with existing laws and actions to rein in some of “crypto’s” worst excesses, such as thefts, the unilateral power of centralized protocol engineers and developers as well as the general association with criminal/unethical activity. Other than that, BSV is simply operating on the Bitcoin protocol as it was originally released in 2009. To oppose BSV in the 2020s is like going back to 2009 and telling everyone Bitcoin is a terrible idea. It doesn’t make sense for Bitcoin OGs to do this… unless they never actually liked Bitcoin as Satoshi made it.
Digital assets… or fiat?
Like many other digital asset exchanges, Kraken likes to exist in regulatory gray areas—emulating the world of stock markets and FX trading platforms, but using “censorship-resistant cryptocurrency” as an argument for special consideration.
Their main business is fiat currency and making as much of it as possible. On the surface they advocate for BTC and other digital assets as a new, less-regulated form of money. But rather than seeking out new ways to use these assets in a real economy of real goods and services, their use case is rather limited: promote them to “investors” as buy-low, sell-high instruments that somehow always rise in price over time. The particular volatility associated with digital asset prices attracts risk-hungry traders, even though it’s one of the main reasons this new form of money isn’t widely adopted by the general public.
Rapidly rising fiat prices for digital assets (starting with BTC) was both the best and worst thing that could’ve happened to Bitcoin and the wider industry. On the one hand, it generated mainstream hype and got millions more interested in the technology. On the other hand, it was like the cliche of the working-class family that wins the lottery—greed, jealousy, allegiances, trust and friendships became important.
Suddenly billions of dollars were at stake, with wealth, power and influence going to those who could get their hands on as much of that action as soon as possible.
BTC only had to be worth more than $0 for this to start happening. There had been scams, hacks, thefts, betrayals and double-crossings even before many “veterans” had even heard the word Bitcoin (look up “Bitcoinica” as one example). Making it all worse was the fact that millions of dollars in value could now be sent to anyone, anywhere in the world, without the legal financial system or law enforcement knowing anything about it. New and more anonymous technologies that emerged later, like Monero and Zcash, only amplified the bad behavior.
Incentives to behave badly grew exponentially with the assets’ value, bringing in unscrupulous actors and tempting even the principled. To stick with the initial anarchist principles of “free the market, free the world,” rather than grabbing as many dollars as possible, was equal to “leaving money on the table” that would be scooped up by someone else anyway. Histories of other new, rapidly growing industries like oil and microprocessors tell a similar story, but even those guys didn’t enjoy the level of freedom and anonymity the cryptocurrency people did.
We’re not claiming to be able to read the minds of exchange operators, or understand their motivations for staying in the business. But when they use their positions to launch coordinated commercial attacks and “cancel” other, perfectly legitimate blockchain networks, while ducking behind the “free market/censorship resistant” umbrella when it comes to actual law, it raises eyebrows. If they truly wanted an open and unregulated playing field, they’d let the market (rather than market operators and conflicted insiders) decide for itself.
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