4 ms·

Many people are asking: Why government should regulate finance? In the US you should look at the so-called free-banking era (1837–1864) or the crisis era (178

by nabla9 5y ago

Many people are asking: Why government should regulate finance? In the US you should look at the so-called free-banking era (1837–1864) or the crisis era (1782–1930). Btw. Free banking didn't mean no rules. It just meant that there was no charter or permission is needed to start a bank, Finance was basically free for all. Easy to get in. Constant stream of economic recessions and banking crises harmed everyone. Wildcat banking increased incentives for risk-taking and fraud to high levels. It hindered economic growth, destroyed wealth of may hard working individuals. The US has huge financial industry partly because the regulation is so extensive. People from all over the world invest their money in the US because they know what when liquidity crisis happens, they still get their money back.

ElViajero 5y ago
> The US has huge financial industry partly because the regulation is so extensive. People from all over the world invest their money in the US because they know what when liquidity crisis happens, they still get their money back. And that is one of the reasons so many people invest in crypto-scams. They are used to the safety of traditional banking, and think that it comes for free. Not realizing that it is a hard earned situation earned thru the pain of a past era and enforcement of regulations. Sadly, people that has no understanding of banking are for a surprise when they realize in what are they really investing and how little recourse they have when the crypto-scamsscams explode.
- mrkramer 5y ago
  Investing in crypto projects is the same like investing in dot com companies back in the day. You invest in concepts not in the actual product or solution and ofc 99% of these projects are unrealistic or team behind them is incompetent.
  - dragontamer 5y ago
    No. There's a big difference. When Webvan went bankrupt, they truly bought all of those warehouses / refrigerated vans. They were honest about their business idea. When "Africrypt" (a recent Crypto group) stole $3.6 Billion from its customers, that's straight up fraud and would not stand even back in the dot-com boom in the 90s. That's the sort of thing US Regulators are trying to protect investors from. ---------- You still might invest into a bad idea (ex: Webvan or Theranos), but those CEOs are truly spending money on vans / warehouses / poorly designed blood tests and not just actively stealing it from their investors. Even when companies criminally lie (ex: Enron or Worldcom), its a far lesser crime than what the Africrypt brothers did just a few weeks ago. The size and scope of the scams currently going on in the Blockchain world is far worse than what happens in US regulated markets.
    - mrkramer 5y ago
      I agree with you on Webvan but Theranos was pure fraud. The so called "Crypto" industry will mature when regulation happens and when real cryptographers and real computer scientists enter the scene and start innovating. Until then we have hyped up teens playing with the buzzwords like blockchain and decentralized finance. >The size and scope of the scams currently going on in the Blockchain world is far worse than what happens in US regulated markets. I somewhat tend to believe that governments all around the world are giving the "Blockchain world" grace period of not being tightly regulated so they can catch as many crypto criminals as they can because let's be honest if these guys were not stealing in the crypto world they would be stealing somewhere else. And I also tend to believe that current financial regulations are enough to regulate crypto as it is but governments are moving slowly as usual.
      - arcticbull 5y ago
        It's been almost 14 years, so where are the "real cryptographers" and "real computer scientists?" I suspect they've been searching and realized there's no "there" there.
        mrkramer 5y ago
        I guess they are not interested; Microsoft recently shut down its Azure blockchain service[0] for example. Facebook made its own crypto coin but I am afraid that will lead to nowhere. Google and Amazon are not very interested as well so real cryptographers and real computer scientists are working on other stuff and on other problems. [0] https://www.zdnet.com/article/microsoft-is-shutting-down-its-azure-blockchain-service/ https://www.zdnet.com/article/microsoft-is-shutting-down-its...
        dkshdkjshdk 5y ago
        Maybe you can find some here: https://scholar.google.com/scholar?&q=zksnark https://scholar.google.com/scholar?&q=zksnark
        5y ago
- elliekelly 5y ago
  I like to follow the fallout from cyrpto/token scams on reddit as they happen and it’s the same thing every time: People who had been touting the benefits of “no regulation” are suddenly angry and outraged that the government hasn’t done more to prevent the scam from happening and isn’t (in their minds) doing enough to get their money back. It’s a leopards ate my face situation. And it’s beyond frustrating but I can also sympathize with them a bit. Who among us hasn’t stubbornly needed to see something for ourselves in order to learn a lesson we could have (and should have) learned by listening to the people with a bit of experience?
sjg007 5y ago
Crypto is the wild wild west.
deleted 5y ago
[deleted]
logicalmonster 5y ago
> Wildcat banking increased incentives for risk-taking and fraud to high levels. The evidence points out that it’s the current banking system that incentivizes risk taking because the international bankers know they’re getting a bailout every time when they mess up. > The US has huge financial industry partly because the regulation is so extensive. People from all over the world invest their money in the US because they know what when liquidity crisis happens, they still get their money back. I’d like to know how this massive regulation helped consumers during the GameStop events at the end of January. Naked short selling is running rampant and the system is protecting these crooks who essentially resell the same shares repeatedly. Stock trading must inevitably take place on a blockchain: it is the only means to publicly verify accurate data. The current system with self-reported data and slap on the wrist fines is completely ridiculous.
- donmcronald 5y ago
  > Naked short selling is running rampant and the system is protecting these crooks who essentially resell the same shares repeatedly. > Stock trading must inevitably take place on a blockchain: it is the only means to publicly verify accurate data. The current system with self-reported data and slap on the wrist fines is completely ridiculous. I don’t know if blockchain tech is up to the task, but I agree in the context of non-negotiable, immutable transparency. It’s the only way we’ll ever find out just how corrupt Wall Street actually is. IMO the answer is very!
- nradov 5y ago
  There's no need to use blockchain technology for stock trading. The current centralized clearinghouse system works fine and is highly scalable. It also allows for transactions to be unwound in the case of mistakes or system failures. No one cares if a handful of retail investors lost money on foolish GameStop trades.
  - logicalmonster 5y ago
    > There's no need to use blockchain technology for stock trading. You can believe what you want, I find the current system very hard to trust. With a blockchain, you don't have to trust anybody: you can just always get verifiable accurate real-time information with no possibility for manipulation or corruption. > The current centralized clearinghouse system works fine I don't understand how anybody could think that a system that can't even reliably and accurately tell you how many shares of real stock are in existence, requires self-interested self-reporting for vital stats with a slap on the wrist fine for "errors", and allows shares to be sold multiple times somehow is working fine. > is highly scalable T+2 time for trades to clear is highly scalable? > No one cares if a handful of retail investors lost money on foolish GameStop trades. The issue isn't that some people made or lost money on a trade: the issue is that there's different sets of rules for different people with the current system.
X6S1x6Okd1st 5y ago
One of the major innovative points of cryptocurrencies and the current DeFi wave is that many interesting things can be built which are non-custodial. Taking one of the largest DeFi exchanges for instance: Uniswap. If the devs of uniswap decide to try and steal all of the funds that have been locked up in their contracts they can't[1] That being said there are plenty of DeFi projects that claim to have no backdoor, but they do. And just because something is non-custodial doesn't mean that the value of the token won't go to zero, e.g. here's a good example of a project that went to zero even though there wasn't a known backdoor: https://www.rekt.news/iron-finance-rekt/ https://www.rekt.news/iron-finance-rekt/ [1]: Assuming no one has missed a backdoor in the code
elevenoh 5y ago
As all information becomes increasingly accessible & transparent tools emerge, central-regulation becomes less & less necessary.
logicchains 5y ago
>In the US you should look at the so-called free-banking era (1837–1864) or the crisis era (1782–1930). Btw. Free banking didn't mean no rules. It just meant that there was no charter or permission is needed to start a bank, >Finance was basically free for all. Easy to get in. Constant stream of economic recessions and banking crises harmed everyone. Wildcat banking increased incentives for risk-taking and fraud to high levels. It hindered economic growth, destroyed wealth of may hard working individuals. This is untrue; the US rate of growth was actually higher during this period (4%+) than it was during the 1900s. And there was way less wealth equality, as there was no central bank with the ability to transfer wealth from all currency holders to the banking and finance industry via printing money and the Cantillon effect.

by nabla9 5y ago

ElViajero 5y ago

> The US has huge financial industry partly because the regulation is so extensive. People from all over the world invest their money in the US because they know what when liquidity crisis happens, they still get their money back. And that is one of the reasons so many people invest in crypto-scams. They are used to the safety of traditional banking, and think that it comes for free. Not realizing that it is a hard earned situation earned thru the pain of a past era and enforcement of regulations. Sadly, people that has no understanding of banking are for a surprise when they realize in what are they really investing and how little recourse they have when the crypto-scamsscams explode.

mrkramer 5y ago
Investing in crypto projects is the same like investing in dot com companies back in the day. You invest in concepts not in the actual product or solution and ofc 99% of these projects are unrealistic or team behind them is incompetent.
- dragontamer 5y ago
  No. There's a big difference. When Webvan went bankrupt, they truly bought all of those warehouses / refrigerated vans. They were honest about their business idea. When "Africrypt" (a recent Crypto group) stole $3.6 Billion from its customers, that's straight up fraud and would not stand even back in the dot-com boom in the 90s. That's the sort of thing US Regulators are trying to protect investors from. ---------- You still might invest into a bad idea (ex: Webvan or Theranos), but those CEOs are truly spending money on vans / warehouses / poorly designed blood tests and not just actively stealing it from their investors. Even when companies criminally lie (ex: Enron or Worldcom), its a far lesser crime than what the Africrypt brothers did just a few weeks ago. The size and scope of the scams currently going on in the Blockchain world is far worse than what happens in US regulated markets.
  - mrkramer 5y ago
    I agree with you on Webvan but Theranos was pure fraud. The so called "Crypto" industry will mature when regulation happens and when real cryptographers and real computer scientists enter the scene and start innovating. Until then we have hyped up teens playing with the buzzwords like blockchain and decentralized finance. >The size and scope of the scams currently going on in the Blockchain world is far worse than what happens in US regulated markets. I somewhat tend to believe that governments all around the world are giving the "Blockchain world" grace period of not being tightly regulated so they can catch as many crypto criminals as they can because let's be honest if these guys were not stealing in the crypto world they would be stealing somewhere else. And I also tend to believe that current financial regulations are enough to regulate crypto as it is but governments are moving slowly as usual.
    - arcticbull 5y ago
      It's been almost 14 years, so where are the "real cryptographers" and "real computer scientists?" I suspect they've been searching and realized there's no "there" there.
      - mrkramer 5y ago
        I guess they are not interested; Microsoft recently shut down its Azure blockchain service[0] for example. Facebook made its own crypto coin but I am afraid that will lead to nowhere. Google and Amazon are not very interested as well so real cryptographers and real computer scientists are working on other stuff and on other problems. [0] https://www.zdnet.com/article/microsoft-is-shutting-down-its-azure-blockchain-service/ https://www.zdnet.com/article/microsoft-is-shutting-down-its...
      - dkshdkjshdk 5y ago
        Maybe you can find some here: https://scholar.google.com/scholar?&q=zksnark https://scholar.google.com/scholar?&q=zksnark
        5y ago
elliekelly 5y ago
I like to follow the fallout from cyrpto/token scams on reddit as they happen and it’s the same thing every time: People who had been touting the benefits of “no regulation” are suddenly angry and outraged that the government hasn’t done more to prevent the scam from happening and isn’t (in their minds) doing enough to get their money back. It’s a leopards ate my face situation. And it’s beyond frustrating but I can also sympathize with them a bit. Who among us hasn’t stubbornly needed to see something for ourselves in order to learn a lesson we could have (and should have) learned by listening to the people with a bit of experience?

sjg007 5y ago

Crypto is the wild wild west.

deleted 5y ago

[deleted]

logicalmonster 5y ago

> Wildcat banking increased incentives for risk-taking and fraud to high levels. The evidence points out that it’s the current banking system that incentivizes risk taking because the international bankers know they’re getting a bailout every time when they mess up. > The US has huge financial industry partly because the regulation is so extensive. People from all over the world invest their money in the US because they know what when liquidity crisis happens, they still get their money back. I’d like to know how this massive regulation helped consumers during the GameStop events at the end of January. Naked short selling is running rampant and the system is protecting these crooks who essentially resell the same shares repeatedly. Stock trading must inevitably take place on a blockchain: it is the only means to publicly verify accurate data. The current system with self-reported data and slap on the wrist fines is completely ridiculous.

donmcronald 5y ago
> Naked short selling is running rampant and the system is protecting these crooks who essentially resell the same shares repeatedly. > Stock trading must inevitably take place on a blockchain: it is the only means to publicly verify accurate data. The current system with self-reported data and slap on the wrist fines is completely ridiculous. I don’t know if blockchain tech is up to the task, but I agree in the context of non-negotiable, immutable transparency. It’s the only way we’ll ever find out just how corrupt Wall Street actually is. IMO the answer is very!
nradov 5y ago
There's no need to use blockchain technology for stock trading. The current centralized clearinghouse system works fine and is highly scalable. It also allows for transactions to be unwound in the case of mistakes or system failures. No one cares if a handful of retail investors lost money on foolish GameStop trades.
- logicalmonster 5y ago
  > There's no need to use blockchain technology for stock trading. You can believe what you want, I find the current system very hard to trust. With a blockchain, you don't have to trust anybody: you can just always get verifiable accurate real-time information with no possibility for manipulation or corruption. > The current centralized clearinghouse system works fine I don't understand how anybody could think that a system that can't even reliably and accurately tell you how many shares of real stock are in existence, requires self-interested self-reporting for vital stats with a slap on the wrist fine for "errors", and allows shares to be sold multiple times somehow is working fine. > is highly scalable T+2 time for trades to clear is highly scalable? > No one cares if a handful of retail investors lost money on foolish GameStop trades. The issue isn't that some people made or lost money on a trade: the issue is that there's different sets of rules for different people with the current system.

X6S1x6Okd1st 5y ago

One of the major innovative points of cryptocurrencies and the current DeFi wave is that many interesting things can be built which are non-custodial. Taking one of the largest DeFi exchanges for instance: Uniswap. If the devs of uniswap decide to try and steal all of the funds that have been locked up in their contracts they can't[1] That being said there are plenty of DeFi projects that claim to have no backdoor, but they do. And just because something is non-custodial doesn't mean that the value of the token won't go to zero, e.g. here's a good example of a project that went to zero even though there wasn't a known backdoor: https://www.rekt.news/iron-finance-rekt/ https://www.rekt.news/iron-finance-rekt/ [1]: Assuming no one has missed a backdoor in the code

elevenoh 5y ago

As all information becomes increasingly accessible & transparent tools emerge, central-regulation becomes less & less necessary.

logicchains 5y ago

>In the US you should look at the so-called free-banking era (1837–1864) or the crisis era (1782–1930). Btw. Free banking didn't mean no rules. It just meant that there was no charter or permission is needed to start a bank, >Finance was basically free for all. Easy to get in. Constant stream of economic recessions and banking crises harmed everyone. Wildcat banking increased incentives for risk-taking and fraud to high levels. It hindered economic growth, destroyed wealth of may hard working individuals. This is untrue; the US rate of growth was actually higher during this period (4%+) than it was during the 1900s. And there was way less wealth equality, as there was no central bank with the ability to transfer wealth from all currency holders to the banking and finance industry via printing money and the Cantillon effect.