Crypto failures such as FTX, 3A, and Celsius have sparked calls for more regulation. But all these were more comparable to traditional financial companies operating within the crypto space, not decentralized exchanges or protocols. Their failures were a result of common issues seen in traditional finance: illiquidity, insolvency, and potential fraud.
Current regulations can actually impede consumers’ ability to protect themselves against risk and fraud. Americans can’t purchase cryptocurrencies directly, but must go through centralized exchanges like FTX. This makes it harder for them to hold crypto assets in their own self-hosted wallets or in regulated custodial banks, which ironically, SEC regulations also prevent. Both would have prevented millions of americans loosing their money in the FTX scandal.
Let’s not confuse the issue. Regulators must do their jobs effectively. Crypto lenders like Celsius should be regulated like banks, and traditional financial exchanges like FTX should be regulated as such. Excessive regulation on the crypto industry, however, will likely make it riskier, not safer. Decentralized protocols built on the blockchain are already more secure and transparent than many regulated financial companies. Because, you know, you can see the funds at all times and a liquidity pool on uniswap cant run illiquid, because, you know, you might lie on the banksheets internally but its pretty hard to lie on the code. I’ve stopped learning phyton and react after a semester in uni but it alludes me how the SEC has somehow not yet grasped this. I have a humanities degree and stay away from excell sheets as much as I can, surely someone more analytical adapt inside the SEC must have made the observation that crypto per se, is not that bad of an idea?
So, amidst all this drama, should we be worried? Will crypto tank, other nations follow, and bitcoin spiral into non-existence? I dont think so. What Vitalik is to bigger protocols and exchanges (apparently he just send a considerable amount of money to kraken) is Balaji to Bitcoin. There’s too many of us halfway financially literate who had enough of the federal reserve and EZB playing poker with global markets. From my perspective, the US can keep running around in circles, regulating and suing all they want. Centralized exchanges aren’t the most customer-secure platforms anyway. The rest of us will be here, buying the dip and taking home the profits. Because what are we thinking, crypto now being declared a security by the US has somehow changed the underlying technology of the probably most awesome FinTech we’ve seen in years? Right. Didn’t think so.