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Anybody who has followed cryptocurrency in the last year knows that major US financial institutions and hedge funds have become heavily involved. The regulation

by shiado 5y ago

Anybody who has followed cryptocurrency in the last year knows that major US financial institutions and hedge funds have become heavily involved. The regulations coming are entirely to do with making the legal burdens of individual custody onerous enough that users place their coins on completely centralized exchanges to manage legal risk, all so these institutions have access to these coins for manipulation purposes like borrowing for shorting. The ONLY regulation you will see is on the average user so they can suck up coins like Daniel Plainview drinking your milkshake, NOT on market manipulation or trading habits of institutions which is the key driver of malicious activity and harm in the cryptocurrency space.

dcolkitt 5y ago
I agree that the end effect will be largely what you suggest: aggregate activity in large institutions at the expense of smaller startups and decentralized protocols. But from talking to people in the space, it seems that most of the large exchanges and hedge funds are vigorously oppose to this law. Bryan Armstrong (the CEO of Coinbase) has repeatedly and publicly criticized the bill. I'll cite Hanlon's Razor: Never attribute to malice what can be explained by incompetence. I think this is simply the result of what happens when we decide our government should be run by a bunch of octogenarian lawyers, most of whom's tech knowledge ends at their ability to reset their WiFi router. Is it really that surprising that Biden, Schumer, Portman, McConnell, Yellen, Pelosi, etc. have no understanding about how crypto works? They were all born before the charge card was even invented.
meowface 5y ago
>NOT on market manipulation or trading habits of institutions which is the key driver of malicious activity and harm in the cryptocurrency space. How much evidence is there of major institutions acting maliciously in the cryptocurrency space, and the scale of the impact? I'm sure there's likely quite a bit of market manipulation from some people or entities who hold a lot of cryptocurrency assets, but as much as I despise finance and financial institutions (of pretty much any kind), I also want to know who to hate even more, if applicable. (Not asking in a rhetorical or contrarian or skeptical way; genuinely trying to understand who's accused of what and why. And excluding Tether, since we all know the accusations, there, and the comment seems to be directed at major US financial institutions that were huge long before Bitcoin was created, if I understand correctly.)
ProjectArcturis 5y ago
There's no need to invoke conspiracy theories about market manipulation. The Senate needed money for this bill, they saw that probably a lot of folks with crypto holdings are evading taxes, and they wrote this provision to make it easier to collect the taxes. It's poorly written, but the clear intent is for companies like Coinbase to have to file 1099s so the government knows who made how much every year, just like they do with conventional stock brokerages.
- w4llstr33t 5y ago
  Crypto can be withdrawn from exchanges to a personal account that only that individual controls. This is unlike stocks, which sit in brokerages and could only be transferred to another brokerage (in kind transfer). An example for someone in the US is that they buy crypto on Coinbase, and then they withdraw that crypto to a hardware wallet that they have control of. They leave their crypto on their hardware wallet for a few years and then transfer all or maybe only some portion of it to a different exchange, say, Kraken, and sell it there. How do the exchanges file a 1099 for that? Maybe while the crypto was on the individual's hardware wallet, they also used some of it to purchase some goods or services. How is that tracked except on the individual's tax return? I'm for regulation because I think it means the crypto space will mature and more people will feel it is safe to get involved. I also don't think people should use crypto for avoiding taxes (I do think that is overblown in the media considering that most blockchains are literally a public ledger, and all the government needs are some crypto experts and they can look at current as well as previous years of transactions, so folks shouldn't be doing anything shady). I do also think that laws should adapt to new technological innovations. The only issue is that there isn't a critical mass yet that this technology is here to stay. The analogy is like fitting a square peg into a round hole. That's what the government is trying to do by over regulating crypto with regulations from the 20th century. I actually would love if crypto exchanges could somehow give 1099s. That would extremely simplify the crypto tax reporting process, which right now can be very complicated, but I just don't see how it would work unless individuals only bought crypto on an exchange, left it on that exchange, and only sold whatever they bought on that exchange.
  - 5y ago
qeternity 5y ago
> for manipulation purposes like borrowing for shorting I see this repeated a lot and I'm still not entirely clear why people feel this way. Most major markets in the world have futures/borrow mechanisms, and one of the key reasons is that it allows shorting. Short selling is a critical element to any healthy market, and we've seen time and time again that markets without well functioning short selling are far more vulnerable than those with (i.e. real estate). For instance, let's presume that crypto takes off, and business start accepting crypto for contractual obligations. If my future costs are in fiat, but future revenues are in crypto, I have a big mismatch with a very risky asset. A futures market (or shorting) allows me to hedge that risk out and protect myself against future volatility. I can lock in my fiat today, to ensure that I can cover my future costs. Without such a mechanism, I might not be able to risk a collapse in crypto markets. Mature features (like borrows/futures) in crypto markets should aid in adoption.
- prepend 5y ago
  I think the issue isn’t that shorting and other functions exist, but that these aren’t carried out by most retail investors. So frequently financial firms will benefit on this functionality using the base accounts of their customers. So the introduction of this intermediation creates value possibility for large firms away from individuals.
  - second--shift 5y ago
    any US resident with a pulse and a SSN can open an account with Interactive Brokers and trade /BTC futures. Just because they don't doesn't mean they can't.
  - qeternity 5y ago
    Shorting is available to pretty much everyone now, especially with Robinhood et al and easy access to options markets (of course most people don’t understand vol and probably shouldn’t trade options). But it’s been easy to short even on the legacy brokers for as long as I can remember (a decade plus). The issue with shorting is that you have theoretically unlimited downside which means greater risk and familiarity with concepts like margining. That is often outside the grasp of the average retail investor.

by shiado 5y ago

dcolkitt 5y ago

I agree that the end effect will be largely what you suggest: aggregate activity in large institutions at the expense of smaller startups and decentralized protocols. But from talking to people in the space, it seems that most of the large exchanges and hedge funds are vigorously oppose to this law. Bryan Armstrong (the CEO of Coinbase) has repeatedly and publicly criticized the bill. I'll cite Hanlon's Razor: Never attribute to malice what can be explained by incompetence. I think this is simply the result of what happens when we decide our government should be run by a bunch of octogenarian lawyers, most of whom's tech knowledge ends at their ability to reset their WiFi router. Is it really that surprising that Biden, Schumer, Portman, McConnell, Yellen, Pelosi, etc. have no understanding about how crypto works? They were all born before the charge card was even invented.

meowface 5y ago

>NOT on market manipulation or trading habits of institutions which is the key driver of malicious activity and harm in the cryptocurrency space. How much evidence is there of major institutions acting maliciously in the cryptocurrency space, and the scale of the impact? I'm sure there's likely quite a bit of market manipulation from some people or entities who hold a lot of cryptocurrency assets, but as much as I despise finance and financial institutions (of pretty much any kind), I also want to know who to hate even more, if applicable. (Not asking in a rhetorical or contrarian or skeptical way; genuinely trying to understand who's accused of what and why. And excluding Tether, since we all know the accusations, there, and the comment seems to be directed at major US financial institutions that were huge long before Bitcoin was created, if I understand correctly.)

ProjectArcturis 5y ago

There's no need to invoke conspiracy theories about market manipulation. The Senate needed money for this bill, they saw that probably a lot of folks with crypto holdings are evading taxes, and they wrote this provision to make it easier to collect the taxes. It's poorly written, but the clear intent is for companies like Coinbase to have to file 1099s so the government knows who made how much every year, just like they do with conventional stock brokerages.

w4llstr33t 5y ago
Crypto can be withdrawn from exchanges to a personal account that only that individual controls. This is unlike stocks, which sit in brokerages and could only be transferred to another brokerage (in kind transfer). An example for someone in the US is that they buy crypto on Coinbase, and then they withdraw that crypto to a hardware wallet that they have control of. They leave their crypto on their hardware wallet for a few years and then transfer all or maybe only some portion of it to a different exchange, say, Kraken, and sell it there. How do the exchanges file a 1099 for that? Maybe while the crypto was on the individual's hardware wallet, they also used some of it to purchase some goods or services. How is that tracked except on the individual's tax return? I'm for regulation because I think it means the crypto space will mature and more people will feel it is safe to get involved. I also don't think people should use crypto for avoiding taxes (I do think that is overblown in the media considering that most blockchains are literally a public ledger, and all the government needs are some crypto experts and they can look at current as well as previous years of transactions, so folks shouldn't be doing anything shady). I do also think that laws should adapt to new technological innovations. The only issue is that there isn't a critical mass yet that this technology is here to stay. The analogy is like fitting a square peg into a round hole. That's what the government is trying to do by over regulating crypto with regulations from the 20th century. I actually would love if crypto exchanges could somehow give 1099s. That would extremely simplify the crypto tax reporting process, which right now can be very complicated, but I just don't see how it would work unless individuals only bought crypto on an exchange, left it on that exchange, and only sold whatever they bought on that exchange.
- 5y ago

qeternity 5y ago

> for manipulation purposes like borrowing for shorting I see this repeated a lot and I'm still not entirely clear why people feel this way. Most major markets in the world have futures/borrow mechanisms, and one of the key reasons is that it allows shorting. Short selling is a critical element to any healthy market, and we've seen time and time again that markets without well functioning short selling are far more vulnerable than those with (i.e. real estate). For instance, let's presume that crypto takes off, and business start accepting crypto for contractual obligations. If my future costs are in fiat, but future revenues are in crypto, I have a big mismatch with a very risky asset. A futures market (or shorting) allows me to hedge that risk out and protect myself against future volatility. I can lock in my fiat today, to ensure that I can cover my future costs. Without such a mechanism, I might not be able to risk a collapse in crypto markets. Mature features (like borrows/futures) in crypto markets should aid in adoption.

prepend 5y ago
I think the issue isn’t that shorting and other functions exist, but that these aren’t carried out by most retail investors. So frequently financial firms will benefit on this functionality using the base accounts of their customers. So the introduction of this intermediation creates value possibility for large firms away from individuals.
- second--shift 5y ago
  any US resident with a pulse and a SSN can open an account with Interactive Brokers and trade /BTC futures. Just because they don't doesn't mean they can't.
- qeternity 5y ago
  Shorting is available to pretty much everyone now, especially with Robinhood et al and easy access to options markets (of course most people don’t understand vol and probably shouldn’t trade options). But it’s been easy to short even on the legacy brokers for as long as I can remember (a decade plus). The issue with shorting is that you have theoretically unlimited downside which means greater risk and familiarity with concepts like margining. That is often outside the grasp of the average retail investor.