With the crypto sector being generally scorned by many in the traditional financial system and being termed the “wild west” by Gary Gensler, chair of the SEC, it would appear that it is a sector long overdue for some serious regulation – or is it?
Throughout the world’s media, and out of the lips of some of the most influential people in finance the cry continues: “crypto is for drug dealers, terrorists, and money launderers”. The most recent crypto scam is called out, and held up as a warning to any investor who would chance their arm in such a wild and dangerous sector.
Surely it’s time to bring in the regulators to crack down on these nefarious operations, before they grow so big as to maybe even impact on our safe and sure monetary system.
Ok, I think we all realise that crypto is not as bad as described above. Yes, there have been some outright scams, and even the most ardent crypto enthusiast would have to admit that most of the nearly 12 thousand crypto projects operating today will probably not survive beyond the next year or so.
However, this is a very new industry. It has only been going for around 12 years, since Satoshi Nakamoto mined the very first bitcoin. Since that time, crypto has grown into a $2.4 trillion sector, which many believe will grow to match the size of the gold market cap in the next few years, of between 9 to nearly 14 trillion dollars.
This new blockchain/crypto industry is also said by some analysts to be the most innovative and disruptive since the internet. Various other sectors such as commerce, finance, and gaming will be massively changed by such innovations as NFTs and DeFi.
So back to the question of regulation, and who will carry it out?
Gary Gensler, chairman of the SEC is one candidate. He supposedly has the credentials of having taught blockchain at MIT. However, his technology background is thrown into question by a Forbes article which also posits that the MIT stint was a necessary move in order to give him the “academic bona fide to secure his nomination as SEC Chair”.
This is perhaps borne out since, as Gensler’s comments on crypto have neither been intelligent, nor constructive. It appears that he only wants to be seen as the strong arm of the law, and talks of all cryptocurrencies as being securities, even while acknowledging the innovation that they bring.
Gensler would also have ‘middle men’ thrust in between each crypto platform and the public they serve. These middle men are a typical element of the existing financial system, and it could be very much argued that their existence is just not worth the amount of value that they suck out of both the platform and the investor.
In fact, all the kind of regulation envisaged so far comes from what exists in the traditional financial system today. A system that is rigged in favour of the banks and which is controlled by government.
The many reports of banks such as JP Morgan, that rig markets, and operate in a nefarious way, are always in the media. They pay the fines, which are trifling when you consider how much their operations nets them, and then they carry on as before – too big to fail, and apparently beyond the reach of any regulator to do anything of serious consequence about them.
A future where all crypto platforms are regulated by these kinds of people is extremely worrying. Innovation would be stifled, advances in technology would be slowed, and all just to pacify those who have the most to lose from crypto’s disruption of finance and other prominent sectors.
Were all regulators in the mould of Hester Pierce of the SEC, then there would surely be overwhelming support for regulation. It can easily be seen that she recognises crypto’s game-changing technology for what it is, and her “safe harbour” proposal is both thoughtful and well-considered.
Nonetheless, it would seem that chairman Gensler is the one who sets the tone, and we know what he wants.
Therefore, what about an unregulated crypto?
We all know that this will not be. But imagine if it were, and what could potentially happen?
Scams would continue to persist. But eventually the investor would learn to be more savvy. Having a regulator controlling your every move means that you never develop that savviness. Instead you are just corralled into a straitjacket of compliance that utterly disables your ability to think for yourself.
The system, and its regulators would have us thrown out of the crypto market all together because it is far too ‘dangerous’ for the average investor. This should be yet another playground just for the ‘accredited investor’, because you surely don’t understand anything about investing unless you have at least $1 million at your disposal.
The average Joe on the street is front-running Wall Street in the wildly innovative and profitable market that is crypto. Yes, some, if not many can get burned if they are not careful, but at least there are endless possibilities in the crypto world, as opposed to none in traditional finance.
The regulators are coming and they will seek to suffocate and stifle, as they will be tasked to do by the banks, who are the ones who ultimately hold the authority in this world.
With decentralisation as a very real way out of their grasp, let us hope that retail investors are given the power to break their chains, and to really learn what schools will not teach, about who ultimately controls the financial system, and by extension who controls us all.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
