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A Bird's Eye View
$195 billion in bank fines since 2000. DeFi is the alternative.
2 min readOctober 19, 2022
Gary Gensler spent 18 years at Goldman Sachs before overseeing Wall Street as SEC Chairman. Jerome Powell built his wealth at The Carlyle Group before setting monetary policy. Janet Yellen earned $7 million in speaking fees from the banks she'd later regulate as Treasury Secretary.
The revolving door between Wall Street and Washington isn't a bug—it's the norm.
Key Takeaways
- Major banks have paid $195+ billion in fines since 2000. These aren't edge cases—they're structural issues.
- DeFi isn't a wholesale replacement for traditional finance. It addresses specific gaps: censorship resistance, permissionless access, transparent yield.
- The practical value of DeFi depends on your location. In Turkey or Argentina, it's a necessity. In the US, it's mostly theoretical—for now.
The Track Record
| Institution | Fines | Violations |
|---|---|---|
| Bank of America | $87B | 214 |
| JPMorgan Chase | $40B | 282 |
| Wells Fargo | $27B | 181 |
| Citigroup | $25B | 122 |
| Deutsche Bank | $18B | 59 |
| UBS | $16B | 83 |
| Goldman Sachs | $16B | 44 |
Source: Violation Tracker
These aren't anomalies. They're structural. Financial services is the most fined industry in the world.
The Fed
The Federal Reserve was designed at a secret meeting on Jekyll Island in 1910. Six men, including J.P. Morgan's senior partner, created what became the Federal Reserve System.
The Fed is quasi-governmental: accountable to Congress in theory, operationally independent in practice. Its dual mandate (formalized 1977):
- Maximize employment
- Maintain price stability (~2% inflation target)
Since 2012, the Fed has explicitly targeted 2% annual inflation. Over 400 years, interest rates have followed a steady downward trend:
The Correlation
Since 2008, the Fed's balance sheet and the S&P 500 have become increasingly correlated:
The US dollar's reserve currency status provides flexibility other nations don't have. Global demand for dollars buffers inflationary pressures—but not everyone has that privilege.
In countries where currency devaluation, capital controls, and political instability are daily realities, DeFi isn't theoretical. It's necessary.
Where DeFi Actually Matters
Turkey: 78% Inflation
Between 2021-2022, Turkey's inflation hit 78.62% year-over-year—the highest in 24 years. Local banks offered no recourse.
DeFi offered an alternative: stablecoins and non-custodial wallets to secure value, transact globally, and bypass capital controls. No bank account required. No paperwork. Just a mnemonic phrase.
China: $1.5 Billion Frozen
In 2022, Chinese authorities froze $1.5 billion in customer deposits across four Henan province banks. When depositors protested, officials manipulated COVID health tracking to restrict their travel.
Centralized systems can freeze your funds by policy decision. DeFi infrastructure is governed by code, not regional authorities.
The Yield Innovation
DeFi introduced programmable financial primitives—lending, borrowing, trading, insurance. Some protocols collapsed. Bad actors got exposed. The market selected for sustainable innovations.
The survivors—AMMs and liquidity pools—represent DeFi at its best: transparent, permissionless infrastructure that distributes trading fees to liquidity providers instead of concentrating them among gatekeepers.
In traditional finance, market-making is gated and opaque. In DeFi, anyone can provide liquidity and earn fees.
The Honest Assessment
The future of finance won't be fully decentralized or fully centralized. It'll be hybrid.
In unstable economies: DeFi solves immediate problems—currency devaluation, capital controls, financial repression. It's already working.
In stable economies: Traditional banking offers superior convenience, consumer protections, and reliability. DeFi's value propositions remain mostly theoretical.
The current DeFi user base:
- Individuals seeking financial sovereignty
- Founders building at the frontier
- Sophisticated capital chasing yields
- Substantial speculative activity (memes, airdrop farming)
When legacy rails start using blockchains as settlement layers, the theory becomes reality for everyone. Until then, DeFi's practical value depends on where you are and what you need.
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A Bird's Eye View
finance$195 billion in bank fines since 2000. DeFi is the alternative.
2 min readOctober 19, 2022
crypto
Gary Gensler spent 18 years at Goldman Sachs before overseeing Wall Street as SEC Chairman. Jerome Powell built his wealth at The Carlyle Group before setting monetary policy. Janet Yellen earned $7 million in speaking fees from the banks she'd later regulate as Treasury Secretary.
The revolving door between Wall Street and Washington isn't a bug—it's the norm.
Key Takeaways
- Major banks have paid $195+ billion in fines since 2000. These aren't edge cases—they're structural issues.
- DeFi isn't a wholesale replacement for traditional finance. It addresses specific gaps: censorship resistance, permissionless access, transparent yield.
- The practical value of DeFi depends on your location. In Turkey or Argentina, it's a necessity. In the US, it's mostly theoretical—for now.
The Track Record
| Institution | Fines | Violations |
|---|---|---|
| Bank of America | $87B | 214 |
| JPMorgan Chase | $40B | 282 |
| Wells Fargo | $27B | 181 |
| Citigroup | $25B | 122 |
| Deutsche Bank | $18B | 59 |
| UBS | $16B | 83 |
| Goldman Sachs | $16B | 44 |
Source: Violation Tracker
These aren't anomalies. They're structural. Financial services is the most fined industry in the world.
The Fed
The Federal Reserve was designed at a secret meeting on Jekyll Island in 1910. Six men, including J.P. Morgan's senior partner, created what became the Federal Reserve System.
The Fed is quasi-governmental: accountable to Congress in theory, operationally independent in practice. Its dual mandate (formalized 1977):
- Maximize employment
- Maintain price stability (~2% inflation target)
Since 2012, the Fed has explicitly targeted 2% annual inflation. Over 400 years, interest rates have followed a steady downward trend:
The Correlation
Since 2008, the Fed's balance sheet and the S&P 500 have become increasingly correlated:
The US dollar's reserve currency status provides flexibility other nations don't have. Global demand for dollars buffers inflationary pressures—but not everyone has that privilege.
In countries where currency devaluation, capital controls, and political instability are daily realities, DeFi isn't theoretical. It's necessary.
Where DeFi Actually Matters
Turkey: 78% Inflation
Between 2021-2022, Turkey's inflation hit 78.62% year-over-year—the highest in 24 years. Local banks offered no recourse.
DeFi offered an alternative: stablecoins and non-custodial wallets to secure value, transact globally, and bypass capital controls. No bank account required. No paperwork. Just a mnemonic phrase.
China: $1.5 Billion Frozen
In 2022, Chinese authorities froze $1.5 billion in customer deposits across four Henan province banks. When depositors protested, officials manipulated COVID health tracking to restrict their travel.
Centralized systems can freeze your funds by policy decision. DeFi infrastructure is governed by code, not regional authorities.
The Yield Innovation
DeFi introduced programmable financial primitives—lending, borrowing, trading, insurance. Some protocols collapsed. Bad actors got exposed. The market selected for sustainable innovations.
The survivors—AMMs and liquidity pools—represent DeFi at its best: transparent, permissionless infrastructure that distributes trading fees to liquidity providers instead of concentrating them among gatekeepers.
In traditional finance, market-making is gated and opaque. In DeFi, anyone can provide liquidity and earn fees.
The Honest Assessment
The future of finance won't be fully decentralized or fully centralized. It'll be hybrid.
In unstable economies: DeFi solves immediate problems—currency devaluation, capital controls, financial repression. It's already working.
In stable economies: Traditional banking offers superior convenience, consumer protections, and reliability. DeFi's value propositions remain mostly theoretical.
The current DeFi user base:
- Individuals seeking financial sovereignty
- Founders building at the frontier
- Sophisticated capital chasing yields
- Substantial speculative activity (memes, airdrop farming)
When legacy rails start using blockchains as settlement layers, the theory becomes reality for everyone. Until then, DeFi's practical value depends on where you are and what you need.
Comments
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