The Asbestos Doctrine: Why Crypto Must Be Contained, Not Condoned

For more than a decade, the public discourse surrounding cryptocurrency has been trapped in a fog of misleading analogies and deterministic prophecies. Its defenders have presented it as a misunderstood marvel, variously portrayed as the next iteration of the internet, a lifeboat for the oppressed, or a necessary evolution in finance. This techno-optimistic narrative, which insists the technology is a neutral tool whose potential is just beginning to unfold, has proven to be a dangerously seductive fiction. After sixteen years of a global, multi-trillion dollar experiment run on the public without its consent, the results are in. The appeal to future potential is no longer a credible defense, but an admission of present failure. The fog has cleared, revealing not a nascent utility but a fundamental, structural harm. Cryptocurrency is not the new internet; it is financial asbestos, a socially corrosive material woven into the fabric of our digital lives, and the only responsible public policy is one of aggressive, principled containment.

The initial counter-arguments to this stark conclusion often depend on a flawed characterization of the technology as a politically agnostic tool, akin to the printing press. This comparison fails on its face. While the printing press was a vector for all ideas, its core function was the disintermediation of information. The core function of cryptocurrency, as revealed by its actual use, is the disintermediation of accountability. Its foundational feature (so-called "trustlessness") is merely a euphemism for a system that cannot be governed, audited, or controlled. Its ideology, steeped in a deep distrust of democratic institutions and a nihilistic contempt for regulated systems, is not an incidental feature but the consistent expression of its purpose. The system was not co-opted by bad actors; it was purpose-built to serve them. To dismiss this as a mere genetic fallacy is to ignore the overwhelming evidence that the system’s outcomes have perfectly matched the destructive intent of its founding philosophy.

Nowhere is the harm more apparent or the stakes higher than in the debate over stablecoins. Proponents have framed these dollar-pegged instruments as the industry’s killer application, a benevolent tool for global citizens. This narrative is a Trojan horse. In reality, stablecoins are unregulated shadow banks built on a fatally flawed structure. They are simply digital Money Market Funds, instruments known to be so inherently fragile that their heavily regulated counterparts required massive Federal Reserve bailouts in both 2008 and 2020 to prevent systemic collapse. To champion the proliferation of a less transparent, globally distributed version of this demonstrably unstable structure is an act of profound recklessness. Each transaction privatizes profit for an offshore issuer while socializing risk directly onto the American taxpayer, who serves as the unwilling and uncompensated insurer of last resort. When—not if—a major stablecoin suffers a crisis of confidence, the political pressure on the United States to prevent a global financial meltdown it enabled would be immense, creating a policy trap of its own making.

The attempt to justify this system by pointing to its use in nations like Argentina is a cynical defense that immediately recasts responsible risk analysis as "paternalism." But let us be clear: it is not paternalism to diagnose a systemic poison, and our diagnosis must begin with empathy. It is an undeniably rational, even desperate, choice for an individual family in Buenos Aires to flee a hyper-inflating currency. The tragedy, however, lies in a textbook fallacy of composition: that very act of individual survival, when performed in aggregate, guarantees the collective catastrophe of digital dollarization. This process is not empowerment; it is the ceding of a nation’s monetary sovereignty to an unaccountable, unregulated, offshore corporate power. It forces a coerced trade: a flawed but public sovereign, answerable to its people, for an opaque private sovereign, answerable only to its shareholders. This is not a "lifeboat." It is the exchange of a seat on a leaky public ferry for a place on a private pirate ship, with the American taxpayer implicitly forced to underwrite the insurance policy for the entire pirate fleet.

The attempt to justify this digital expansionism by invoking a geopolitical struggle is equally bankrupt. The notion that the United States must promote private stablecoins to counter a hypothetical future dominance of China’s digital yuan is a deeply flawed premise. It conflates the technical structure of a state-backed CBDC with a privately issued, risk-laden stablecoin. Moreover, it rests on a xenophobic and simplistic "us versus them" worldview that paints American financial policy as a zero-sum game against a foreign "other." China's capital account is not open, and its digital currency project remains a domestic pilot. To build a case for risking global financial stability on such a flimsy and fear-based projection is an abdication of sound policymaking. A world where Europe or another democratic bloc takes the lead in setting digital currency standards is not a threat to be countered but a development to be welcomed within a rules-based international order.

The persistent defense of cryptocurrency’s potential relies on a constant appeal to false historical parallels, chief among them the comparison to the early internet. This analogy is fundamentally dishonest. The internet began as ARPANET, a government-funded project with a clear, utilitarian purpose. Cryptocurrency, by contrast, was born of an ideological whitepaper and built from the start as a speculative, anti-state project. The argument that it is still "early days" has long expired. After sixteen years, far longer than it took the early internet to demonstrate its world-changing utility, cryptocurrency’s primary use cases remain crime, gambling, and recursive financial speculation. This is not a victimless abstraction. It is the ransomware that shutters a hospital's emergency room; it is the life savings of a retiree vanishing overnight in a 'rug pull'; it is the global marketplace for the most odious materials imaginable, all facilitated by a system that launders accountability by design. Its failure to produce a single, large-scale, non-speculative application is not a sign of immaturity but a definitive market verdict on its nature. Legitimate enterprises have rejected it not because it is new, but because it is inefficient-by-design, making it fundamentally unsuited for any serious purpose. It is an empty shell.

This leads to the final, desperate defense: that cryptocurrency is a form of pure, permissionless innovation whose value cannot yet be judged. The comparison often made to that of early experiments on electricity which took decades before practical applications and a commerical electrical grid were realized. This argument presents a false choice between progress and stagnation, but a mature society does not operate on such naive binaries. It rightly reserves the power of an Innovation Veto—the ability to reject a novel creation not out of fear, but out of a rational calculation that its socialized harms vastly outweigh its privatized and hypothetical benefits. To justify this by claiming electricity also took decades to mature is a profoundly dishonest analogy; its foundational experiments were contained, harmless, and carried no public cost, whereas this is a live, multi-trillion dollar trial whose catastrophic externalities are already present and undeniable.

This veto is not a hypothetical power; it is a cornerstone of modern civilization. We exercised it against human cloning on ethical grounds, against leaded gasoline for public health, and against chlorofluorocarbons to protect our planetary environment. The demand for 'permissionless innovation' is therefore a demand to suspend this critical societal function. It is an argument for a sociopathic model of progress, one that is unaccountable to the public it purports to serve. We have been asked to tolerate immense and ongoing social harm in exchange for a perpetually deferred, purely hypothetical future benefit. But society is not a laboratory, and its citizens are not test subjects. The line for such tolerance has long since been crossed. The experiment has failed.

Let this not be mistaken for a defense of the status quo. The existing financial system is deeply flawed: it is often slow, exclusionary, and unjust. But it is built upon a framework of law and accountability that can, with effort, be reformed. It is, to borrow from Churchill, the worst possible system, except for all the others that have been tried. The promise of cryptocurrency is not a better system; it is the alluring but false promise of a perfect system, a revolutionary shortcut that avoids the hard work of democratic reform. In reality, it offers only a descent into a state of nature, where the only rule is code and the only protection is your own vigilance.

The correct path forward, therefore, is not to legitimize this harmful system with bespoke regulation. This is a categorical error. We regulate dangerous but necessary industries like aviation or nuclear power. There is no Federal Commission for Safer Pyramid Schemes. There is no Bureau of Responsible Bank Robbery. We prohibit these activities because the act itself is the harm. To regulate cryptocurrency is to formally absorb financial asbestos into the architecture of our society, signaling that this non-productive casino is a legitimate part of our economic life. This would create the very moral hazard that guarantees future bailouts. The fundamental paradox at the heart of this policy debate boils down to the "Regulatory Trilemma". A policymaker can pursue any two of the following three goals, but is barred from achieving all three.

1. Preserve Crypto's Core Nature - Permissionless, decentralized, censorship-resistant.
2. Ensure Full Regulatory Compliance - Effective KYC/AML, sanctions enforcement, investor protection.
3. Prevent Moral Hazard - Ensure the state and taxpayers are not on the hook for bailouts.

The attempt to fuse (1) and (2) is a technical impossibility; a truly decentralized protocol cannot be forced to comply with state mandates. The choice to prioritize (2) and (3) is an act of transformation, not regulation; a fully compliant and regulated "stablecoin" is no longer a permissionless crypto-asset, but merely a fintech product like a PayPal account, built on a ridiculously inefficient database. The most perilous path, and the one we are on, is to preserve (1) while feigning (2). This creates massive (3) moral hazard, as the government puts a stamp of legitimacy on a system it cannot actually control, guaranteeing a future crisis. This dismantles the central premise of 'responsible innovation.' Any attempt to regulate cryptocurrency either fails to control it or succeeds only by destroying it. Therefore, the only logical policy is not to legitimize this contradiction, but to contain its harm by keeping it separate from the real economy.

Thus the only sound policy is one of principled, relentless containment. We must accept that cryptocurrency, as a bad idea, may never be fully eradicated. The same is true of other socially destructive ideologies like fascism or racism. A liberal society does not defeat such ideas by trying to erase them from existence, an impossible and authoritarian task. Instead, it fights them by denying them institutional oxygen. It makes them socially unacceptable, legally actionable, and politically powerless. It builds a firewall between them and the levers of public life.

Let us be clear about the fundamental chasm that separates these two worldviews. This is not merely a technical disagreement but a profound philosophical schism over the very purpose of a civilized society. A policy of containment is grounded in the belief that the state is a collective project, a social contract whose highest duty is to protect the whole from systemic risk and corrosive externalities. The opposing view, often disguised as technological inevitability, champions a radical vision where individual action, unconstrained by democratic oversight, is the ultimate source of order. It willfully ignores the fallacy of composition—the demonstrable truth that what benefits an individual in isolation can be catastrophic for the collective—and recasts this societal destruction as a virtue called "disruption." This is not a debate between two valid paths to progress; it is a conflict between the architects of a durable society and the apostles of its dissolution. It is a debate about whether the immense, certain harm of the present is a fair price to pay for the uncertain, hypothetical benefit of the future. And who should pay that price.

Asbestos was not embraced as a known poison; it was thought to be a durable cheap insulator. It was precisely this surface-level utility that made it so dangerous, leading society to weave it into the very structure of our schools and homes while its catastrophic harm remained latent, a microscopic and systemic threat that festered for decades. This is the structural parallel to cryptocurrency: a technology whose proponents market its novel features while ignoring the slow-acting poison of financial instability, ensuring that by the time the harm becomes undeniable, it will already be deeply embedded within our economic architecture, forcing a painful and costly remediation on a society that never consented to the risk. The eventual societal verdict was not to seek 'safer' applications, but to ban its future use entirely—to rip it from our walls and bury it in the ground.

This is the Asbestos Doctrine. The goal is not a futile "War on Crypto" that seeks to scrub its code from every computer. The goal is to use the full force of existing law and democratic institutions to ensure it remains a marginal, isolated phenomenon. This means aggressive enforcement of securities laws, anti-money laundering statutes, and sanctions. It means severing its lifeline to the regulated banking system and its ability to use US Treasuries as reserves. The objective is to firewall the offshore casino so completely that its collapse, when it comes, is an isolated event, not a systemic contagion. It is to let it wither in the dark, cut off from the light of legitimacy. Some will always seek it out, just as some will always seek out any number of harmful pursuits. But public policy must ensure that it cannot grow, that it cannot achieve systemic importance, and that it cannot poison the broader social and economic well. The faith we must place is not in the phantom promise of abstract future technologies or a decentralized utopia, but in the long, proven arc of our own democratic institutions to contain and marginalize the destructive ideas that threaten them.