> New banking legislation may be necessary to preserve a moat between crypto and the balance sheet of any financial institution that might be classed as too big to fail. The other goal should be to protect ordinary investors from crypto scams by introducing effective regulation and enforcement.
Two things can be true at once, and I fail to see how crypto is going to keep American consumers from getting scammed when the one constant for crypto has been rugpulls and scams perpetrated on people giving crypto companies money.
you are absolutely right that crypto is the wild west right now and people are getting scammed left and right, unfortunately. That being said to experienced crypto users the difference between banking with crypto and banking with banks is night and day. Crypto is far superior. So in the long run I expect as the infrastructure around crypto improves, and the scammers are beaten back, that will extend to every day retail users as well.
Exactly. All one needs to do is just to buy Bitcoin and hold it yourself. Everything else is noise at best, scam at worse, including the fiat banking system once it unpegged from its gold backing.
Bitcoin may be useful like Gold is useful, but it's the other chains like Ethereum and NEAR that provide tremendous value. The velocity of money on NEAR (and its closest competitors I'm sure, but I don't know enough about those) is so fast and I am able to conduct business with people across the world orders of magnitude faster than was previously possible. Banks will never catch up. Crypto still has some kinks to work out, particularly for less tech savvy users, but the fundamentals are so so much better than the existing banking networks. Try doing international business at 5am on a Sunday with a bank.
Both issues have the same cause. A firm that scams it’s customers will have more money for marketing than an honest one, all else equal. Still there’s a big difference between overdraft fees, which are part of the terms of service, and outright theft of assets held in trust in violation of contract with a proven intent to defraud.
Why does the US have such poor consumer protection? If the banks are so universally unpopular, and provide such terrible service, how is this not a political issue?
(note that you don't pay overdraft fees unless you have an overdraft, and crypto does not permit overdrafts at all ..)
> Why does the US have such poor consumer protection?
European snark: Because "muh freedumb!!!" should also apply to businesses because businesses are people, Citizens United has proven that.
Reality: because consumer protection laws can cost businesses quite a lot of profit, so they do everything they can to lobby for lax consumer protection. An entire party's ideology boils down to a "lean government" model where the government only does the bare minimum to keep the lights running and private companies do everything else.
> If the banks are so universally unpopular, and provide such terrible service, how is this not a political issue?
It is, but banks have completely bought off Congress by donations.
> note that you don't pay overdraft fees unless you have an overdraft
Banks have been accused of manipulating the order of account credit and debit transactions to artificially generate overdraft fees for over a decade [1][2], and Wells Fargo was embroiled in many years of court battles to keep that cash cow alive [3].
All we need is for crypto exchanges and brokers to be regulated by the SEC just like other securities dealers. Exchanges have to have a national exchange license. Brokers, dealers, and exchanges have to be separate. Customer funds have to be held in bank accounts. Cash gets FDIC insurance. Crypto assets held by brokers get SIPC insurance. FINRA regulates people in crypto and can discipline them. Everybody gets formal audits.
You can still lose money because something you bought went down. But you don't lose assets some broker was just holding for you.
Japan does it this way, since the Mt. Gox episode. FTX Japan users are getting their assets back.
The SEC has the authority to do this right now. They won a lawsuit back in November.
They've been holding off on bringing the hammer down on unregistered crypto securities that hadn't been shown to be frauds yet. They have no reason to hold back any more.
The SEC won a case last year which pretty much answered the question "is it a security" as "Yes" for just about everything where the promoter can make money off of it.
An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." - US vs Howey.
The "oh, but crypto is different" argument doesn't fly any more. Not since FTX.
You can still watch "Don't be like Larry", FTX's Super Bowl ad.[1]
Oh interesting, I didn't know about that. I thought the XRP case was still ongoing so didn't realise there had been change.
Wasn't trying to make value judgements on whether anything is a security, just was wondering if it's how US crypto exchanges could operate in this weird legal grey zone
In my opinion, authorities avoided regulating this space because they already have a precedent. They convinced Bitfinex to use multi-segregated wallets to store customer funds, and this resulted in the Bitfinex Hack. My guess is that authorities are probably keeping too careful when it comes to regulation.
> You can still lose money because something you bought went down.
I think this is the major argument the SEC has that crypto shouldn't be regulated.
Without anything underneath it, crypto is by its nature by more volatile - it can increase by 1000 fold in a minute but can also drop to nothing.
If regulated, more people would be drawn to it and any large losses could cause contagion in the rest of the market - people lose a lot on their crypto holdings so sell some of their bonds/stock in a hurry, which lowers the price across the market. Crypto has had several 2008 style crashes and is likely to have more but as yet they haven't effected the rest of the market/economy.
And to go a bit further, ban leveraged trading. They mention this in the article and I fully agree. Leveraged trading encourages short term speculation and casino like behaviors. I would go even further and ban leveraged trading in any financial asset period.
Note also that Canada does it this way: cryptos on an exchange are treated as a security, and the provincial regulators license the exchanges and tell them what cryptos they can even list. FTX repeatedly tried to get into Ontario and the OSC wouldn't let them. Well done OSC!
Meh. it's really easy to spot scams in crypto (unlike traditional securities, which is kind of the whole point) and it's also pretty easy to avoid losing funds to a failed exchange.
If you're not willing to spend the hour total of research required to use crypto safely then don't use it.
Not everything in crypto is a scam. It's easy to tell with eg tokens by checking the contract: if the organization behind the tokens can issue arbitrary numbers of new tokens or replace the contract then it's a scam. The FTX token would have failed this test if anyone involved had cared to look.
This is something you can't do with securities and it's why I'm not convinced regulators really need to be as closely involved.
Tokens aren't shares (if they wanted to issue shares they would have just done an IPO) and if you follow my rule you're extremely unlikely to get scammed.
I don't know what to tell you if you're going to assume the other side isn't arguing in good faith although I feel the same way about most of the anti-crypto people here.
If it just took an hour of research to meaningfully know that FTX had stolen customer funds, there wouldn’t have been 8bn stolen.
This argument keeps getting trotted out yet people keep getting hit with more and more sophisticated scams, on and off chain, not to mention hacks which you won’t discover with just an hour of research.
FTX was really obvious. I saw it before and lumped it in with the half dozen other scams I see every time I mess with crypto. The people scammed fall into two categories:
1) People who shouldn't have been using crypto at all because they can't handle it.
2) People deliberately misusing other people's money who did actually know better.
I think a large amount of the stolen funds fall into the second category.
It’s embarrassing for the U.S. regulatory regime that FTX.us was insolvent as well (you could see this by comparing borrow lending data to their wallets after the implosion, as well as some messages released in the CFTC complaint).
Hopefully the various regulatory bodies can set aside arguing over defi and whether something is a commodity or a security and get some common sense rules in place.
Which is strange since it would have unveiled his insolvency, unless the bill he wanted had loopholes or he figured he could steal more from international to fill the hole?
From my understanding SBF was lobbying AGAINST DeFi. And lobbying for as many crypto as possible to be considered commodities instead of securities.
He was definitely not lobbying for more oversights in centralized industry players.
To be fair, there are already sufficient law and power to use against centralized industry players. It's not going to help when SEC rather go after the Kardashians and then mingle with SBF himself right after. Laws are not the problem. Using existing laws fairly and evenly instead of selectively towards all players. That's the problem.
> Sam Bankman-Fried, the former poster boy for cryptocurrency
What? Who ever thought that? To the kind of people writing this article probably since the companies they work for were on SBF payroll.
> Hilary J. Allen, a law professor at American University, said, testifying in last week’s hearing of the Senate Banking Committee
This woman went there in front of the US congress and spewed a bunch of incorrect technical information. She said Bitcoin can be easily controlled by a few core devs and mining pool operators. She clearly didn’t read about the events that led to the Bitcoin Cash split. Now you may have opinions on this but you have to agree she doesn’t understand the dynamics between nodes, miners and mining pools.
One thing is to not understand something and have an uneducated opinion but another is to appear in front of a congress to testify something as a verified professional. Do you really expect some proper closure on this when government is relying on such low quality input?
> One thing is to not understand something and have an uneducated opinion but another is to appear in front of a congress to testify something as a verified professional. Do you really expect some proper closure on this when government is relying on such low quality input
These kind of statements are usually meant tongue in cheek and should not be read in an absolutist manner. You can read this kind of intent in text when a normally serious publication like The New Yorker uses a whimsical statement like "poster boy".
Stripped of hyperbole, they mean he was head of one of the largest crypto exchanges in the world, as a result of which many people in the crypto world looked up to him.
That's an accurate assessment - although if you're a crypto supporter, then I guess you would wish it not to be.
54 comments
[ 3.3 ms ] story [ 132 ms ] thread> New banking legislation may be necessary to preserve a moat between crypto and the balance sheet of any financial institution that might be classed as too big to fail. The other goal should be to protect ordinary investors from crypto scams by introducing effective regulation and enforcement.
U.S. retail banks steal ~$8B from American consumers every 3 months in the form of overdraft charges and fees (source, Moebs: https://breckyunits.com/the-great-bank-robbery.html).
If FTX is a scam, throw the book at SBF, sure. But crypto is the only hope I see for American consumers to stop getting scammed.
Why would crypto?
That’s a smart way to put it. Also explains why I saw FTX marketed so much more heavily than Coinbase.
(note that you don't pay overdraft fees unless you have an overdraft, and crypto does not permit overdrafts at all ..)
European snark: Because "muh freedumb!!!" should also apply to businesses because businesses are people, Citizens United has proven that.
Reality: because consumer protection laws can cost businesses quite a lot of profit, so they do everything they can to lobby for lax consumer protection. An entire party's ideology boils down to a "lean government" model where the government only does the bare minimum to keep the lights running and private companies do everything else.
> If the banks are so universally unpopular, and provide such terrible service, how is this not a political issue?
It is, but banks have completely bought off Congress by donations.
> note that you don't pay overdraft fees unless you have an overdraft
Banks have been accused of manipulating the order of account credit and debit transactions to artificially generate overdraft fees for over a decade [1][2], and Wells Fargo was embroiled in many years of court battles to keep that cash cow alive [3].
[1] https://www.forbes.com/sites/halahtouryalai/2012/02/22/are-b...
[2] https://www.forbes.com/sites/halahtouryalai/2013/06/11/yes-b...
[3] https://cointelegraph.com/news/wells-fargo-could-take-overdr...
You can still lose money because something you bought went down. But you don't lose assets some broker was just holding for you.
Japan does it this way, since the Mt. Gox episode. FTX Japan users are getting their assets back.
The SEC has the authority to do this right now. They won a lawsuit back in November. They've been holding off on bringing the hammer down on unregistered crypto securities that hadn't been shown to be frauds yet. They have no reason to hold back any more.
The brokerage regulations are just common sense and it would be a shame if they got tied into battles about whether token XYZ is a security or not.
An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." - US vs Howey.
The "oh, but crypto is different" argument doesn't fly any more. Not since FTX.
You can still watch "Don't be like Larry", FTX's Super Bowl ad.[1]
[1] https://www.youtube.com/watch?v=3fWQob8RZj4
Wasn't trying to make value judgements on whether anything is a security, just was wondering if it's how US crypto exchanges could operate in this weird legal grey zone
I think this is the major argument the SEC has that crypto shouldn't be regulated. Without anything underneath it, crypto is by its nature by more volatile - it can increase by 1000 fold in a minute but can also drop to nothing.
If regulated, more people would be drawn to it and any large losses could cause contagion in the rest of the market - people lose a lot on their crypto holdings so sell some of their bonds/stock in a hurry, which lowers the price across the market. Crypto has had several 2008 style crashes and is likely to have more but as yet they haven't effected the rest of the market/economy.
Maybe also because at moment crypto has no value/use for the economy.
If you're not willing to spend the hour total of research required to use crypto safely then don't use it.
This is something you can't do with securities and it's why I'm not convinced regulators really need to be as closely involved.
In any case your username makes me strongly suspect you are not arguing in good faith, but merely propagandizing/shilling.
I don't know what to tell you if you're going to assume the other side isn't arguing in good faith although I feel the same way about most of the anti-crypto people here.
but if you assume it is, you'll basically be correct
This argument keeps getting trotted out yet people keep getting hit with more and more sophisticated scams, on and off chain, not to mention hacks which you won’t discover with just an hour of research.
1) People who shouldn't have been using crypto at all because they can't handle it.
2) People deliberately misusing other people's money who did actually know better.
I think a large amount of the stolen funds fall into the second category.
Oh wait…
/s
Hopefully the various regulatory bodies can set aside arguing over defi and whether something is a commodity or a security and get some common sense rules in place.
He was definitely not lobbying for more oversights in centralized industry players.
To be fair, there are already sufficient law and power to use against centralized industry players. It's not going to help when SEC rather go after the Kardashians and then mingle with SBF himself right after. Laws are not the problem. Using existing laws fairly and evenly instead of selectively towards all players. That's the problem.
/s
This is also wrong.
My simple campaign finance reform proposal:
- campaigns must not accept money from anyone who is not a registered voter
- businesses found to be donating to both sides of the same race, or different parties at the same time, to be convicted of bribery
They're completely composed of citizens. Citizens can make political donations, because citizens vote. Businesses do not.
What? Who ever thought that? To the kind of people writing this article probably since the companies they work for were on SBF payroll.
> Hilary J. Allen, a law professor at American University, said, testifying in last week’s hearing of the Senate Banking Committee
This woman went there in front of the US congress and spewed a bunch of incorrect technical information. She said Bitcoin can be easily controlled by a few core devs and mining pool operators. She clearly didn’t read about the events that led to the Bitcoin Cash split. Now you may have opinions on this but you have to agree she doesn’t understand the dynamics between nodes, miners and mining pools.
One thing is to not understand something and have an uneducated opinion but another is to appear in front of a congress to testify something as a verified professional. Do you really expect some proper closure on this when government is relying on such low quality input?
https://www.johndcook.com/blog/2021/01/18/gell-mann-amnesia/
> What? Who ever thought that?
These kind of statements are usually meant tongue in cheek and should not be read in an absolutist manner. You can read this kind of intent in text when a normally serious publication like The New Yorker uses a whimsical statement like "poster boy".
Stripped of hyperbole, they mean he was head of one of the largest crypto exchanges in the world, as a result of which many people in the crypto world looked up to him.
That's an accurate assessment - although if you're a crypto supporter, then I guess you would wish it not to be.
I think the only contentious part here is how you quantify "easily".
And yes, she probably doesn't understand the dynamics.
That even if you round up the devs by government authority, the code will start forking like crazy.