It is difficult to get a crypto proponent to understand something, when their crypto wealth depends on them not understanding it.
EDIT: If you steal my gold or other metal store of value, I can pursue you in court and recover my loss (either the actual materials lost or fiat value). If you steal my single named security, I can pursue you in court and recover my loss (or the clearinghouse will reverse the transaction). Crypto cannot be both an investment accessible to everyone, governed by nation state regulators, and a wild west where you can lose everything at a drop of a hat due to an opsec slip and there is no recourse. That is incompatible with the law.
https://www.cnbc.com/2021/11/19/over-10-billion-lost-to-defi... (Criminals have made off with over $10 billion in ‘DeFi’ scams and thefts this year) <-- This won't fly with the folks who write and enforce the law. Their job is to protect people (investors!) from the folks who believe those who owns the keys and crypto owns the property regardless of how it was obtained.
Fun fact but the gov basically stole gold from ppl b4 in the good ole USA. They made it illegal to hold - if you were caught having gold it was a 10k fine. PPL were forced to go to their banks and sell their gold at a loss.
That article uses the term hoarding but don't be fooled they made holding any relevant amount of gold for investment illegal. You were still allowed to have gold necklaces and the like though
I have heard mixed things about the historical event you're mentioning. I've heard it was a law that wasn't strongly enforced. Of course just having the law in the books probably served its purpose of reducing gold transactions. But that's different than the government actively fining people $10K. Which would be like $200K today by the way.
Also, I'm not sure if it is an apples-to-apples comparison. Back then the main money of the society was associated to gold. There is no such link today. I.e. the value of USD isn't associated to BTC. The government had a existential need to reduce gold transactions. You can argue the government is threatened by crypto etc. but like I said it's not apples-to-apples.
No strongly enforced means it will be selectively enforced. And there are many such opportunities to do so for a government if they need some leverage on certain individuals. And these days, a Jury can be bypassed making Jury nullifications immaterial. Essentially it is government or more like unelected bureaucrats becoming overloads over private individuals.
Yes. Root comment states that government regulation protects wealth by giving examples of several situations in which a government regulation protects wealth. Root-1 comment gives an example of government regulation destroying wealth, by giving a concrete example involving an asset class referenced in root comment.
I would say that the two comments together point towards a complex relationship between governments and the wealth of it’s citizens.
These same folks allow regular people to do options trading, invest in any individual stock and other forms of wild gambling all from the convenience of their phones (complete with fun animations!)
It's also rather difficult to actually recover losses in court in a civil case unless you're rich enough/the amount at stake is large enough to eat the losses in court fees/collections measures and still make a profit (winning a judgement does nothing if the losing party simply refuses to pay, at which point you have to engage the Sherrif/place liens on property/hire collections agencies/etc). Whether it should be that way or not, that's the reality. These same folks allow that system as well.
I'm more inclined to think the regulators will go the way of rich/those who make campaign contributions/those who can lobby. I wish we didn't live in that world, but we do. The evidence that we do has been unmistakable since 2008. So some of the scammier micro-cap coins might get regulated out of existence, but with Wall St taking an interest and plenty of wealthy people on board, crypto as a whole is going to stick around IMO.
While I agree that crypto is not compatible with financial legislation as written, in the sense of having a third party (the state) back up your assets, it's not necessarily incompatible with law itself. It wouldn't be shocking to me if a government explicitly circumscribed parts of crypto as an unregulated space, where they legally provide no guarantees about asset protection. But I doubt the US government would do something a little risky like this.
And customers who experience a loss are made whole through EFTA [2] and Reg. E [1] (if transfer related), with banks eating any costs unrecoverable after pursuing those who perpetrated the theft. Does Coinbase reimburse you if lose your crypto due to fraud [3] [4]? If not, clearly regulation is warranted if they put themselves forth as a custodian and exchange. This doesn't happen in centralized finance, and everyone has some semblance of recourse (depending on fraudulent loss experienced; either your securities or commodities are returned, or investment insurance pays out).
Those are only certain types of fraud. There are others that are not covered. For instance, someone stole my wife's credit card information and bought nearly $3k worth of stuff from various stores. The company refused to cover it. Apparently once your loss exceeds a certain amount, they suddenly become much less willing.
If someone somehow lost 11.6M due to credit card fraud, I seriously doubt they'd get their money back.
You are not liable for credit card fraud in your name in the us. You should have been able to refuse to pay. That sounds shady that the company tricked you into making them whole for something you aren't liable for.
You do realize that using credit cards is completely irrelevant to trading in a regulated marketplace? The closest connection is that both are parts of the financial system, but that’s about it.
The vast majority of the value proposition of crypto is that it operates outside of legal and regulatory frameworks. It doesn't settle faster than instant payments (which, in many countries, are usually much cheaper or free and have settlement targets of <60 seconds), and it's a store of value because of technological controls (vs monetary policy).
I want to be open minded and am really trying hard to "stay curious" in this technology domain. Please share any points I would've missed about the benefits of crypto, besides the ability to evade government controls around value transfer or storage and that there is no ability to reverse fraudulent transfers (to the benefit of billions of dollars in theft). I will readily admit it has benefits for folks in places like Venezuela, Turkey, or anywhere else with bad faith fiscal and monetary policy, but not the world as a whole. I know of people in Venezuela who are attempting to operate outside of the dysfunctional financial system, and they use Zelle [1]!
Lets focus on one topic instead of a hodgepodge of unrelated reasons why you dont have confidence in this system
Banks state backed insurance came retroactively and it took decades for people to feel confidence in that system and is one of several factors in why the customer experience has things you like. You can still find a sliver of society that doesn't trust banks. That confidence and transaction reversibility isnt inherent to banks, and the lack of these redundancies isnt inherent to crypto.
> You can still find a sliver of society that doesn't trust banks.
I don’t believe it’s necessary to pander to fringe groups, just as I wouldn’t entertain the concerns of sovereign citizens and similar folks “off the reservation.” Financial and banking regulations in developed countries (including the US) are robust, and arguably are sufficient to provide a firm safety net for participants in the system.
However, most losses in crypto are not happening from custodial exchanges, but dAPPs that get hacked... or phishing targeting folks that have custody of their own private keys.
> If you steal my gold or other metal store of value, I can pursue you in court and recover my loss
Stolen property is stolen property. Not all stolen property is recoverable. Even stolen property with a paper trail may not be recoverable (ask Bernie Madoff fraud victims who have expensive lawyers) or may not be compensate-able. Cars, bikes, phones, etc. get stolen every day. If I meet someone to buy something for $1000 cash and they just run off with it, I've little recourse.
I'm a crypto proponent, and I'm pretty pro regulation.
The reason is because integrating current legal systems with crypto actually makes it more powerful and valuable. Existing legal frameworks can be used to link a purely digital world to the physical world; ex. for us to reliably trade tokens in physical assets (house, painting), we need courts and systems we can leverage for confidence and rule of law.
Therein lies a tradeoff and irony, by mixing such systems. You might say "just build it on a centralized system", and in an ideal world that would be great. The problem is that bureaucracy and politicization of systems make it impossible for innovation to occur: simply look at the friction facing car sharing (Uber), online betting/gambling, housing sharing (Airbnb), etc. Those things can't be the wild west, but society is clearly better off and wants those services.
I suspect some jurisdictions will be friendlier to crypto and more willing to explore those spaces. Innovation will flock there, and eventually everyone else will just follow.
How much value has been lost to inflation this year? Why is that acceptable but coding errors are not? I am not a crypto-currency enthusiast but I remember the Bitcoin whitepaper arguing against centralized currency. So it was critical of the Federal Reserve.
I think people should be allowed to choose. If they don't want regulation then fine.
I don't think that's how the western world works. If someone or something doesn't want regulation then we look the other way. Crypto became so big that we now have to protect investors that doesn't know what they're doing. Overall we have to reduce scams, increase trust and liability
> Why is that acceptable but coding errors are not?
People voted for and happily accepted the policies that created the inflation. Inflation is a consequence of Congress allocates trillions of dollars in spending that can only be funded by debt. Whether the Federal Reserve converting that debt into money is merely the only way the elected government can receive the money it desires without collapsing the economy.
This depends on the cause of the inflation. If an asset loses value because it becomes less scarce then no value is lost. Inflation can happen for other reasons to.
Who's being protected if I'm fully aware of the risks? I feel like education is much more valuable than dictating what is "too risky" for an individual investor.
But agreed, what you've described is the most-likely outcome.
The rest of the population is protected. It's problematic to have both the disillusioned scammed and scammers running around with freshly acquired capital to do more harm to other people.
I am talking about people who won't participate like me. It's in my interest to regulate crypto. It's not because I care about people who lose money investing in some nonsense. It's all good, stupidity should have consequences. I do care however about scammers having more capital to conduct more scams in other areas of life or worse yet using it to buy politicians. I also care about the danger of having some % of the population (mainly young men) who just lost everything and won't find a place in society pushing them to crime or marginalized life.
I mean those are the same reasons we have to ban pyramid schemes for example - we don't want to have a lot of losers (even if they are dumb losers who entered the scheme on purpose) and unethical now wealthy winners.
Crypto's price has been driven by the increase in crypto allocation in the total world investment portfolio. Right now crypto is at 2.6T, gold 11T, stocks are 122T.
The percentage of crypto in the world portfolio can't grow forever though. Once it reaches its limit, the harsh reality will very slowly start to settle in. Crypto doesn't generate any value (unlike stocks, bonds, real estate) and doesn't have any intrinsic value (unlike gold). Its value is entirely based on faith.
The best case scenario would be growth proportional to total wealth growth. But why hold something more risky and with lower returns compared to stocks?
There are crypto networks that does betting. The natural next thing is insurance, which can be considered a special case of betting.
The "harsh" truth might very well be, that a lot of industries that have been governed by priviliged organisations will turn into algorithmically governed DAOs.
A lot of people in the financial sector will probably loose their job, as cheaper alternatives for financial products will occur in self regulated algorithmically governed systems.
The "bitcoin is the crypto definition" view should be abandoned. And it should be understood that crypto means algoritgmically governed economies for now. Later it will be algorithmic governance.
Ie. Cryptos market cap is at least equal to the financial sector. And probably we are only scratching the surface with that statement.
But Bitcoin is not competing against currency, it's competing against investment assets.
Also, inflation is simply not a problem. 2.5% on average over the last 20 years, and almost no volatility. Bitcoin will never achieve that level of volatility because there's no central authority which directs its value.
I don't understand this push for regulation of cryptocurrencies. Just let the mathematics govern. It'll either work on its own, or as people lose their money to trickery and/or carelessness, there will be less and less to regulate as people stop participating.
That's a rather heartless take. You could make the same argument regarding the need to protect any vulnerable members of society. Say, people who are immunocompromised during a global pandemic. Oh wait...
It's never just pure mathematics. You always have a human layer on top, and that means that there is an attack surface for self-interested people to take advantage of others. The purpose of regulation is to minimize the damage those people can do.
I suppose in a future where all the humans are extinct, and monolithic AI's rule the planet, your comment would hold more water.
It's odd that people don't conceive of the health of their neighbor's investments as a support for their own.
Lots of people losing lots of money in your neighborhood is bad.
A good number of people winning the lottery by defrauding others is bad, they make for shitty neighbors.
Ideally cryptocurrencies will disappear on their own before lots of people have lots of money tied up in them. Regulating them makes them appear safer than they actually are.
Can you elaborate on this further? I seem the market cap of Tether being quite tiny compared to BTC and ETH. Also Solana is nearly as large and will probably be much larger than Tether in a few months.
Near-zero cost transactions are not sustainable. They're basically burning through their VC money to pay a small number of validator nodes to host their blockchain, which is not that different from using a centralized database.
read the bloomberg article on tether and try to understand what that means. It's fair to say that there's a huge scam going on in the whole cryptomarket. If you're in the crypto-bubble everyone just keeps dancing, because "look at me, I made another 10k today and get 20% on my staked coins", but like with every scam the music will stop and many people will lose all their IOUs which they believed were worth thousands.
Crypto doesn't seem much different from other technologies facing regulation - there seems to be a tendency to fit square pegs (new technologies) in round holes (existing regulatory frameworks), hence the worries that regulators will mess things up.
Isn't the entire appeal of crypto is that it's not regulated? Why the hell would I want it if it's controlled just like a fiat currency. That means it's susceptible to idiotic government decisions right?
The only reason our regulatory masters every say this shit is because they want a piece of the pie for themselves. You see it in every industry where they're not getting a cut.... oh gambling very very bad! Regulate the hell out of it and now it's fine to have sports betting and all sorts of other "sin" pleasures available.
Then there's always this "guarantee" that the tax dollars will go to the children except they pull the rug out on other money that was previously going there.
> That means it's susceptible to idiotic government decisions right?
That's the point. I'm not sure why people think that crypto is just going to be allowed to exist outside of government control. Of course government is going to want to get their hands in it. And while the technology might be resistant to that, there are still other things the government can do, just like they do with fiat, to gain control of crypto. For example, putting you in jail I you don't do what they want. Exactly like they do with taxes in the US.
It'd be hard to do in the US as its not a tax. The 5th amendment is pretty clear stating "nor shall private property be taken for public use, without just compensation.", Now that crypto is main stream the backlash would be immense and citizens have the 2nd amendment (in some states) to back it up.
I think we're talking about different things. I'm not saying the government is going to take try and just take everybody's crypto. But they absolutely could regulate in any way the want, just like with fiat.
In other words, crypto changes absolutely nothing when it comes to the relationship the government has with your money. If the government wants your money and you don't give it to them, you go to jail. Crypto isn't going to change that.
Is crypto considered money though or is this more equivalent to the government coming in and repurposing your tv? Generally curious, not trying to pile on what if scenarios
Definitely money. You really think the government is just going to let you loophole your way out of taxes?
When was the last time TV’s went up in value by thousands of times, creating tons of millionaires and billionaires, and advertised itself as a money replacement? The government isn’t stupid when it comes to collecting your money.
I would bet the explosion in cryptocurrency values over the past 5 years has been more from "everyday people" who care less about the philosophical underpinnings of cryptocurrencies and more about investing the best performing asset of the past few decades. so when they start getting scammed and raising ire about it, of course regulators will step in - that's their job
1. Initial Exchange Offerings (IEO) are specifically excluding US participants, and sometimes Canada and China based participants.
2. The US regulations are inadequate for legitimate smaller companies that want to bootstrap, requiring time-consuming legal applications to the SEC that may not get final approval - not a trend really, but more of a reinforced reality.
It makes more sense for an entrepreneur to bootstrap a company outside the US and avoid any US touchpoints, if you want to bypass the mechanics of VC capitalization, SEC friction and address a market need that will not result in a unicorn.
This indeed seems reasonable in the eyes of the contemporary understood society, which is only a couple of hundreds years old anyways.
A counter argument could be that Crypto is regulation.
Crypto economies encode all sorts of incentive structures to promote an inhibit various behaviors of its users.
The only difference is that these regulations are not governed by the elected government but by algorithms.
And yes, some modern networks have included mechanisms for handling financial stability. Eg. the Maker coin that have a lever for shutting everything down in case of an emergency.
The SEC has already proven that they can't keep up with crypto. I don't think crypto will survive if it becomes regulated. While there is a lot of manipulation happening in crypto, there is a lot of organic grassroots efforts as well for people that value privacy and true decentralization. I can only imagine how quickly they'd work to destroy both of those things and target cryptocurrency that promotes those ideals. There is nothing stopping them from regulating exchanges as is.
It is probably impossible to regulate Crypto altogether, as it is merely a term with no sound definition.
Regulations would probably also hit, eg., in-game economies, that are essentially the same as crypto economies, just them being controlled by a central agent.
So... I know someone with about that many bitcoins. They have never used a notary to sell any coins whenever they want. They have cash in multiple countries in many different banks and jurisdictions. I wouldn't say the notary and police interviews are required.
Isn't it just a tad bit disingenuous to say "those same bitcoins", when, as we all know, their value has appreciated by around five orders of magnitude since then?
The joke is that the only reason crypto wouldn't "survive" if unregulated is because they (the feds) would un-regulate it out of existence.
...
This is kind of philosophically interesting in light of Giorgio Agamben's discussion of sovereignty and law, in which the prime act of the sovereign is to enact the "ban", i.e. deciding who or what is excluded from the law, which is itself still a status in relation to the law, specifically one of exclusion. So people who trade crypto can be unregulated in the sense of gray area, yet-undecided legality, or they can be "unregulated" in the sense of "explicitly excluded from the legal realm", banned (abandoned), removed from any sort of legal relationship with the state. The USA isn't China, where the idea of someone being "unpersoned" for trading crypto seems like an act that the state could choose to make, but that's the sort of thing I thought would make a good joke.
I think unregulated in this case means crypto market in general is prone to pump and dump schemes and other market manipulation without legal repercussions
It's more interesting to me why we have a seemingly obvious belief that pump and dump schemes (which are effectively a sort of coordinated social phenomenon rather than a material movement) should be regulated. Begs the question: what is the "point" of the financial system, considered as a kind of bounded game, and why is that interesting to the state as an institution?
I'm no political philosopher, but I'd say, for example, the Preamble of the U.S. Constitution says the government's purpose is to “promote the general welfare." Phenomena like bank runs harm the general welfare, so the government has an interest in preventing or mitigating them.
I agree that bank runs harm the general welfare, and the reason why we can make that claim is because of the material relationship between the banks and the general population, as individuals participating in the economic system in order to ensure their own welfare.
But if we look at other sorts of more complex financial instruments, the sort of thing that's inaccessible to an average citizen, then why are they protected by the state as well? The obvious answer would be "well, banks invest in complex financial instruments, and the state wants banks to be protected". But regulating financial instruments isn't necessarily the only way of ensuring that the banks' service to their customers remains stable, it's just one possible path.
To play fair we need some rules to the game. You can’t punch in a face during the basketball game and once someone starts doing it all the time then most would stop playing at that point and go play another game.
Yes there are some rules. But for the majority of people if someone takes advantage of you, with algorithm or socially, then there is no way to punish them. You have to be careful. You can solve this by educating people to be cognizant of risks but who will do that? Where is the incentive?
If you are big enough in any game the rules are different. Think of Etherium DAO when it got hacked they decided not to play in the original network and fork it and play a different game.
I’m not going to pretend I know the future or anything, but I will say that, while this is a common series of events, #4 can absolutely go two different ways. Everyone loves a good underdog story, but I also wouldn’t say that winning is the most common outcome.
A useless generalization which you could apply to a lot of things or people. First, they ignored Trump, then they mocked him, then they fought him, then he won.
The point is that this only works when the truth is on your side. “They” are understood to be the dominant/incumbent forces, but the truth eventually wins.
There maybe be millions of crypto holders, but how many of them will be single issue crypto voters? Probably only a fraction. I would be legitimately surprised to learn that it had any kind of measurable voting impact.
EDIT: If you steal my gold or other metal store of value, I can pursue you in court and recover my loss (either the actual materials lost or fiat value). If you steal my single named security, I can pursue you in court and recover my loss (or the clearinghouse will reverse the transaction). Crypto cannot be both an investment accessible to everyone, governed by nation state regulators, and a wild west where you can lose everything at a drop of a hat due to an opsec slip and there is no recourse. That is incompatible with the law.
https://www.cnbc.com/2021/11/19/over-10-billion-lost-to-defi... (Criminals have made off with over $10 billion in ‘DeFi’ scams and thefts this year) <-- This won't fly with the folks who write and enforce the law. Their job is to protect people (investors!) from the folks who believe those who owns the keys and crypto owns the property regardless of how it was obtained.