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Source: The Financial Times
Translation: Telegrafi.com
Do you remember when cryptocurrency was so heavily regulated and analyzed, unnecessarily controlled by authorities, that the entire market crashed spectacularly as one regulated platform - after another - fell into oblivion?
No, I don't remember either. Because it's not exactly like above, is it? The last time the cryptocurrency market collapsed, in 2021-22, it wasn't about the industry being heavily scrutinized by regulators, but quite the opposite. It was precisely because of the lack of regulatory oversight in the so-called "crypto-space" that the barons of this sector thought they had the right to play with other people's money as if in the Monopoly game.
It was the huge loopholes in regulations around risk, leverage, and transparency that were exploited and ended up causing many cryptocurrency projects to collapse as the market turned its back on them. And it was the lack of consumer protections — and awareness of the risks involved — that caused so many ordinary investors to lose their life savings (of course, most crypto barons were safe, because they knew better than to invest all their money in cryptocurrency).
And yet, the idea that what is needed is less regulation, that crypto has been treated unfairly and should simply be accepted as a harmless part of the financial system, is what is now clearly being promoted by the cryptocurrency industry and by its supporters.
"Delete the CFPB. There are too many regulatory agencies that are duplicative," wrote Elon Musk - a man so involved in the internet world that he thinks in terms of the concept of "deleting" a government agency - on his platform. X on Wednesday. Musk was referring to the Consumer Financial Protection Bureau [CFPB], a US watchdog agency that aims to protect Americans from the predatory behavior that led to the recent cryptocurrency collapse.
It's no surprise that the world of cryptocurrencies has been in a state of euphoria since the election victory of Donald Trump, who, after once calling the industry a "fraud", then introduced himself as the "president of crypto" and promised to make America the "cryptocurrency capital of the planet." Cryptocurrency prices rose sharply on expectations that Trump might win, and rose even further when it became clear that he did. Bitcoin- has risen by about two-fifths since the election, hitting new highs near $100 [€95]. The estimated market value of all cryptocurrencies - a dubious metric, but the only one available - has reached more than a trillion dollars [€952.1 billion].
Meanwhile, Musk's favorite "meme-coin", Dogecoin, has exceeded Bitcoinin terms of earnings, increasing by 150 percent since the election. Why? BECAUSE Doge-i is the acronym for the new "government efficiency" department that Musk is expected to lead. Is this just completely ridiculous or terribly bleak? I guess it depends on your mood.
It appears that Trump will keep his promises to the crypto world, and that the more than $100 million that the crypto lobby spent on the US election — which accounted for almost half of all corporate spending — is paying off handsomely. Last week, it was reported that Trump is consulting with the crypto industry on whom he should nominate as the next chairman of the Securities and Exchange Commission [SEC]. (The current chairman, crypto critic Gary Gensler, has said he will step down before the 45th president becomes the 47th, after Trump said — at a press conference for Bitcoin-in - that he would fire him on the first day of his presidency.)
In addition to the massive support that multibillionaire titans of the cryptocurrency industry are giving him, Trump also has personal financial interests in crypto - such as his sons' ventures, World Liberty Financial.
None of this should lead us to believe that Trump will actually commit to keeping his promises. But it should concern us. In the past I have shied away from discussions of crypto as a "risk to the system" because it has been relatively small and so disconnected from the rest of the financial system. But, this is changing. After SEC approval for exchanges in Bitcoin earlier this year, cryptocurrency has become much more connected to the rest of the financial system. And the numbers are big: the ETF [Exchange Traded Fund] e Bitcoin-it, recently launched by [American investment company] BlackRock, has already reached an amazing $48 billion [€45.6 billion].
Martin Walker, a senior fellow at Warwick Business School, worries that regulators are unable to keep up. “One thing history teaches us about financial crises is that risk always builds up and then explodes in areas where regulators never seem to expect it,” he tells me. “Flaws in the financial system are not always obvious ... Cryptocurrency finance is so big now that it will almost certainly present macro risks [political, social or economic upheavals that harm businesses operating within a country] ... that are both dangerous and poorly understood.”
Ironically, those pushing for crypto deregulation are most likely to bring about its next collapse. But, next time, it might not just be crypto that will burn. /Telegraph/
