Fiat brokers cutting service, from stocks or forex, is very relevant here. As they control the spreads and what liquidity is at a given time. And the huge issue again is sucking people back to the Fiat banking system, from crypto.. making it more volatile. The CIA definitely wants volatility to kill crypto's use-case as a real currency. Having people lever up (And then pull it out as fiat) is the easiest way to achieve this. Further, you're paying interest on money you already had. Am I being hyperbolic about the CIA? Yes. But is this exactly what they want? Yes

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Of course you are paying interest. It's a loan, duh. Forget KYC for a moment, pretend this is a p2p no kyc service. Now, what is your issue? If I come to you because I need to pay taxes, new roof, or buy a house, but all I have is Bitcoin, that doesn't do me a whole helluva lot of good. I can A)sell it, or b) borrow against it. I fail to see why this is an issue.