Summary
- The crypto exchange FTX went bankrupt last November and, ever since, the government and the regulators have been moving in to "gain control" over the emerging "Crypto-world."
- So far, the crypto-world has not been regulated or controlled to any degree, and now that people have lost money and fraud has been discovered, the government is trying to catch up.
- Now, however, as government and the regulators try to piece the new digital world together, we face an environment that will be developed "piecemeal" with independent responses.
- The "new digital world" is going to happen and "ultimately" it is going to be regulated and controlled.
- Now, however, we must go through a period in which the government and the regulators try and integrate the system's individual parts into one big, well-functioning system.
Many wondered when it would happen.
People kept wondering when would the U.S. government, the regulators, jump into the Crypto-space and take on the rising powers that were driving the change in finance.
Well, in November, this part of the world changed.
FTX crypto exchange, as reported by the New York Times,
"once regarded as one of the most reliable firms in the freewheeling industry failed practically overnight, and the founder Sam Bankman-Fried was charged with orchestrating a yearslong fraud."
People got hurt, and the magnitude of the investor's exposure became just that much clearer.
And,
"After FTX filed for bankruptcy in November, the S.E.C., the Justice Department, and the Commodity Futures Trading Commission, another regulator, all brought cases against Mr. Bankman-Fried and two of his top lieutenants."
In January, just after the holidays, the activity against the broader industry picked up.
And, "the activity" is more than likely to continue to increase.
Doing Nothing
The concern had been there.
This was totally related space, or at least most of the space was unregulated.
And, the money involved became enormous, following the asset-price inflation generated by the Federal Reserve System.
In November of 2021, the price of bitcoin approached the $70,000 mark.
Money was flooding all over the place.
And, it seemed as if the government and the government's regulators were afraid to move.
One year later, in November of 2022, the FTX bankruptcy occurred.
People lost money.
Fraud and other criminal acts were claimed to have occurred.
It was time for the government to move before the government began to look too bad.
But, this brings up a very crucial issue.
When should the government move to oversee and regulate a new industry or a new sub-sector of an industry?
This is a dilemma, one that is hard to define.
Here, you have a new technology, in the case of cryptocurrency, you have the development of the blockchain technology. This advancement is really a very important one and will impact a lots of specific spaces.
The crypto world found that the blockchain technology was especially creative and could generate very, very important outcomes.
Creating a crypto-currency was only one special area.
And, this new special area attracted, right from the first, a segment of believers titled libertarians, people who thought that regulation in almost any space should be zero or close-to-zero.
Here in the world of crypto-currencies they saw that they could get rid of central banks, bank regulators, and a number of other "overseers" that constrained innovators from producing a currency that was "free" and was "on the edge of where technology was going."
Crypto-currencies have had strong intellectual support right from the start.
This position secured, almost right from the start, a dichotomy of those that wanted little or no government interference, and those that wanted to bring crypto-currencies under sufficient control to match the extent to which other financial efforts were under control.
Up until last November in the United States, those that argued for sufficient controls seemed to be holding back their efforts. No real explanation for this "hold back" was given.
Now, the "dam" appears to be broken and the regulators are moving out all over the place.
Regulation
I have always argued that regulation was needed and that the regulators needed to move fast enough so that major problems or loss of money did not occur.
To me, the Federal Reserve and others have not moved fast enough to avoid a disruption in the industry. Substantial losses have occurred and, from what I can tell, more losses will take place going forward.
I don't think this needed to happen.
Now, it looks as if there is a rush to catch up with the regulation and control, and so we are going to get "action here" and "action there." My concern is that these actions will all be directed at specific problems and that how the regulation and control should be applied to the whole crypto-currency world will not be as fully considered as it should.
In other words, the regulation and control was going to be forthcoming, sooner or later. To me, the libertarians are idealists that have "great" ideas that we need to be aware of.
However, to me, the world of the libertarians is one of idealistic thinking and will not be able to be fully adapted to the world as it is.
I want markets to operate with the least oversight and control possible, but, I believe that we need to be realistic enough to know and understand that some oversight and control will be necessary.
The important thing to me is to devise a plan that considers the whole picture and works to devise a system that allows as much "freedom" as possible to developers, but that also considers a comprehensive and consistent plan that provides the market will a minimum of control and regulation so that the market can function and do what it is supposed to do.
Unfortunately, the movement to regulate and control the crypto-market to me is being forced to respond "piecemeal" to the disruptions that occur.
Responding in this way does not allow for the new system to be as complete and consistent as we would like it to be.
Furthermore, a system that is put together in such a "hodgepodge" way is something far worse that what even the libertarians want.
A system put together in this "hodgepodge" way then takes time to work through the disconnection of the "new" system of regulation and control to evolve something that is more consistent and complete.
But, this takes time, money, and frustration.
Moving Forward
I am glad that the government seems to be moving on this issue, but I am disappointed that we will be getting a "hodgepodge" system that will take even more time to evolve into the real digital future we want to achieve.
Now, we need to get to work and make the forthcoming digital world a sight to see and an experience to feel as we work within it.
For further details see:
The Crypto-War Is On