Inflicting billions of dollars in losses is a great way to lose the sympathy of politicians.
- Time is up : It’s too late for the crypto industry to get the kind of regulation it wants. The crypto winter arrived before new laws could be drafted and changed the whole tone of the debate in Washington.
Why is this important: Crypto insiders have long dreamed of a world where everything they do is enshrined in their own bespoke regulatory regime: a regime primarily designed to encourage innovation, and one that doesn’t try to enforce laws. of the 20th century to a financial system of the 21st century.
- This dream is, realistically, dead.
The big picture: Regulation, by its nature, tends to focus on minimizing harm rather than maximizing capital formation. Right now, the damage done by crypto is more visible than ever, while the actual benefits seem small in comparison – and rapidly diminishing.
Driving the news: Documented crypto frauds have topped $1 billion, according to the FTC. The Federal Reserve is furious with Voyager Digital for saying it’s FDIC insured. The FBI warns of cryptocurrency scams and the Senate holds hearings on them. The SEC is bolstering its crypto assets and cyber unit — and, according to Bloomberg, is investigating Coinbase for illegal securities trading.
How it works: The SEC, from its inception, has been tasked with overseeing a level playing field, where no one has an unfair advantage. By necessity, this must be done by reducing the ability of the rich and powerful to take advantage of the little guy – something that has been endemic to crypto for years.
- Meanwhile, a deaf Coinbase proudly came out animated videos self-proclaimed degenerates wreaking havoc in a dystopian future. Such shenanigans fatally undermine any attempt to present itself as a mature, sober financial institution.
The bottom line: Crypto still has a few friends in Congress — but not enough to pass new laws any time soon. Meanwhile, regulators are showing their teeth, and none of them have any visible desire to cut the slack in the industry.