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This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like

This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like the wild west. Maybe something could have been different this time? In the end it wasn’t, and it proves the necessity of regulation and institutions. There aren’t very many other aspects of our society where we get to have that kind of experiment and find out whether our approaches to past problems were really correct. Letting us do that may turn out to be the true value of crypto, after the coins go to zero and we start mentioning it in our history books alongside tulip mania and the South Sea bubble.

tasubotadas 4y ago
Why does this need to be regulated? We already have banks for that. And it's not like regulation saved them from being able to become insolvent.
- aaronbrethorst 4y ago
  I get whiplash wearing a seatbelt when my car gets into a crash. Why should I bother wearing that seatbelt? It didn’t save me from the whiplash!
- twblalock 4y ago
  Even in 2008, no depositors in FDIC-insured banks lost their money. Some banks died (Washington Mutual comes to mind), but it's not like FTX where the depositors are left with nothing.
  - aaronbrethorst 4y ago
    I banked with WaMu in 2008. They died. Chase absorbed them. My account balances moved to Chase and were left 100% intact.
- jfghi 4y ago
  Because financial fraud isn’t a victimless crime.
  - nradov 4y ago
    In this particular instance of fraud it's impossible to feel any sort of sympathy for the "victims". They absolutely deserve their losses.
    - deleted 4y ago
      [deleted]
- everfree 4y ago
  > it's not like regulation saved them from being able to become insolvent. It may have, in a way. It's too early to tell, but it's possible that FTX's USA-based corporation ("FTX US") is still solvent. I believe it's the Bahamas-based entity that's in bankruptcy - the one that's in an offshore haven not subject to US regulations. Edit: Looks like FTX US is bankrupt too, but still it may or may not be solvent.
  - kgwgk 4y ago
    FTX US is included in the bankruptcy proceedings.
    - everfree 4y ago
      Thanks, I just read that elsewhere in this thread.
- thinkcontext 4y ago
  The US generally protects retail investors from risk like this in other financial instruments and markets. This isn't really different, its just new enough that regulators haven't caught up. This kind of event could speed that up.
- hnews_account_1 4y ago
  Regulation saved the economy from the worst of it. But this is the kind of uninformed ignorance that is common in these parts. It has been consistently proven that regulation and central banking have prevented the worst of excesses. But live in your own world without reading anything. No one is stopping you.
reaperducer 4y ago
This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like the wild west For those who can read long books, see Anthony Trollope's The Way We Live Now. https://en.wikipedia.org/wiki/The_Way_We_Live_Now https://en.wikipedia.org/wiki/The_Way_We_Live_Now The 2001 television version was also excellent: https://en.wikipedia.org/wiki/The_Way_We_Live_Now_(2001_TV_serial) https://en.wikipedia.org/wiki/The_Way_We_Live_Now_(2001_TV_s... , and only four episodes, instead of 100 chapters.
qudat 4y ago
Hmm, I’m not sure about your conclusion. I would rather see people be more scrutinizing when giving their money to others. It doesn’t matter if there are rules and regulations, people are always going to be duped. When I read about FTX I just think that people need to be better educated. Maybe one could argue that the rules and regulations are specific to providing consumers with tools to make educated decisions about financial investments.
- piva00 4y ago
  > I would rather see people be more scrutinizing when giving their money to others. "I just wish everyone is better" is never a solution for anything that has mass appeal/is used by the general public. You can't ever depend that individual actions will solve a systemic issue, it's not realistic.
  - qudat 4y ago
    The same argument can be made for government intervention. I don’t buy it, there are a ton of examples where not only does the gov get it wrong but also have the opposite effect of what they were trying to achieve. Good intentions is not realistic. The systemic issue is education.
    - piva00 4y ago
      Tell me what systemic issues were solved by individual action. I'd really like to hear examples, I've never found them.
randiantech 4y ago
19th century, or 2008. It’d be same.
- rfrey 4y ago
  In 2008 depositors got their money back. In the 19th century they lost it.
- thinkcontext 4y ago
  2008 had a lot of things the 1800s didn't, like the Fed and FDIC, both of which were very busy.
sangnoir 4y ago
> This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like the wild west. The only difference is that the bank-analogs do not get to face era-appropriate "frontier justice", but instead get to hide under the skirts of 20th century bankruptcy laws.
Mortiffer 4y ago
FTX was a centralized exchange. Those who believe in trying to build an alternative financial system did not use centralized exchanges except perhaps for on-ramp off-ramp. Uniswap among others has been stable with very audited open code that prevents anyone from doing what FTX did. Just want to remind ppl to not put them in the same bucket.
- HDThoreaun 4y ago
  You're always going to need a centralized ramp to convert crypto to fiat though. If everyone thinks they're scams crypto has a big problem.
  - WontGetFooled 4y ago
    You can "buy cash" right now in amount from $100 to $1M on most d-web exchanges. Decentralized versions like Open Bazaar have worked for years just no one uses them so its more expensive and less choice. Decentralized on/off ramps have existed for a LONG time and the fist was a key reason Bitcoin Core (BTC) broke away from the Bitcoin roadmap and became more of an "alt-coin" than the Bitcon we started with. Many think "SegWit" was a hack desigend to inject malicious code into Bitcoin Core to make these types of decentralized exchanges more difficult but then Vitalik just said fuck the US Government and came out with Ethereum.
  - dist1ll 4y ago
    Yeah, but the conversion happens very quickly. Deposit, trade, withdraw. Unfortunately, people leave tons of money on exchanges, for long periods of time. That's the problem. That's what the majority of exchange users are doing.
    - stouset 4y ago
      People leave money on exchanges because the alternatives are worse. They're almost as dangerous (if not more so): how many people have lost millions or billions due to malware, forgotten passwords, failed hard drives, death of the owner and inability to transfer that wealth to their heirs, etc.? All of these problems are solvable with ludicrous levels of complication and confusion, and the average person doesn't even realize they need to take these sorts of measures until they've irrecoverably lost everything.
barkingcat 4y ago
even the idea of "declaring bankruptcy" is a modern regulated construct. In medieval times, if you "declare bankruptcy" your family and dependents get sold into slavery and your wife is sold off to the highest bidder who will buy your debt. In many previous times, if you couldn't pay debts you'd just be killed.
- jrumbut 4y ago
  This idea of auctioning off someone's wife seemed (seems) unlikely to me in a medieval European context (since divorce was hard to come by). What I found was actually weirder: > In medieval Italy and southern France, it was common for the cedens to stand nude but for his shirt and strike a stone with his posterior ('vituperii lapis') while declaring 'cedo bonis'." The patent purpose of this ceremony was as much to satisfy the anger and frustration of creditors as to publicize the debtor's bankruptcy. http://www.mgh-bibliothek.de/dokumente/b/b071148.pdf http://www.mgh-bibliothek.de/dokumente/b/b071148.pdf
  - santoshalper 4y ago
    The medieval version of "I Declare Bankruptcy!!!"
- lazide 4y ago
  Well, those 'previous times' where you just got killed ran concurrent too those slavery times. And if you borrow money from the wrong people today, it can still happen.
- spaceman_2020 4y ago
  They literally had debtor’s prisons when Charles Dickins was still writing!
derangedHorse 4y ago
It seems like you're conflating the value of crypto with the recent blunders of crypto-focused businesses. The fundamental value of cryptocurrency is being able to self-custody tokens of value without relying on any other mechanism besides the proper functioning of the blockchain and its respective rules. What we're seeing here is a lack of clarity/regulation amongst world governments on how crypto and the businesses that manage them should be treated. The promise of DeFi has a higher barrier of entry for those unfamiliar with the technicalities of interacting with decentralized systems, but they generally have more transparency in management of funds than crypto-centric businesses. All code running on the blockchain can be audited and so can the funds held within smart contracts. There are plenty of valid criticisms that can be made of various cryptocurrencies with those models of on-chain finance (and even with the value of cryptocurrencies themselves), but criticism of cryptocurrencies deriving from bad businesses that manage them shouldn't be one of them in my opinion.
- jfk13 4y ago
  > The fundamental value of cryptocurrency is being able to self-custody tokens of value Like dollars under my mattress? Sure, self-custody can be useful sometimes. But (almost) anyone with substantial quantities of "tokens of value" generally appreciates that delegating custody of them to a (regulated and insured) institution provides a lot of both convenience and protection that's difficult to replicate with "self-custody".
pclmulqdq 4y ago
This is the downright civilized version of what happens in the financial wild west. SBF will likely keep possession of his entrails and his head.
everfree 4y ago
I don't see why crypto is incompatible with regulation and institutions. Crypto is a unit of account, not some magical lawless thing that's doomed to never have a regulation written about it. In fact, places like New York already have pretty strict regulations requiring specific licenses for crypto-related businesses. Crypto crises like these are in general due to regulation not having caught up yet, not because companies that involve crypto are inherently un-regulatable. Crypto is speed-running banking regulation over again. It's an ugly process, but the end result will be crypto institutions that are strictly regulated like banks (and/or existing banks will start to handle crypto just like they do any other foreign currency balance). As for the current state of things, FTX is (was) a Bahamas company not subject to the financial oversight of the general western world. The public would generally hesitate to wire large amounts of money off to some company in the Bahamas, but when it's crypto, people don't think twice about it for some reason. After the FTX blow-up, perhaps more people will. It's hard to prevent people from wiring money off to a company in some other country that has much looser financial regulations, but that's not a crypto problem, it's a financial education problem.
- lupire 4y ago
  Crypto is naturally globally networked. What jurisdiction could it be in?
  - everfree 4y ago
    The internet is also naturally globally networked, and it's regulated in every jurisdiction. When a packet hops from one country to another, it's bound by a different set of laws. Same thing with an international financial transaction, crypto or otherwise.
  - martin8412 4y ago
    Banking is largely globally networked as well, at least in the West.
- bwestergard 4y ago
  Why bother with proof of work or proof of stake mechanisms if you want political regulation? In that case, you might as well empower a state's central bank to develop a payment mechanism, and task them with ensuring fairness and enforcing laws around taxes, illegal activity, etc.
127 4y ago
Bitcoin is neither banking or investing. It's a decentralized ledger. I for one am not very excited to continue using the legacy systems with countless of middle men and entrenched rent seekers to extract the maximum they can out of the completely legal trades I do with other consenting individuals.
supdup 4y ago
Protectionist government is the only reason why societies would need to go through cycles of repeating the experiment. When they are protected, they forget how to protect themselves... from their own decisions.
RobRivera 4y ago
maybe the real true value of crypto was the frens we made along the way
xxEightyxx 4y ago
- dang 4y ago
  > What a wonderfully ignorant statement to make. Can you please make your substantive points without personal attacks or name-calling? Your comment would be fine without this bit. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
dsco 4y ago
Institutions funded FTX - what are you on about with your very wordy but empty post?
seydor 4y ago
Or maybe it is the opposite? Why did (institutional) investors trusted and funded this ... thing so much? Maybe the fact that the Founder was literally born inside academic elites has something to do with it? The guy who is supposed to have "won" this , is running an exchange apparently banned by china, largely disliked by regulators and disinvited by governments, and not funded by any government or large investors, right?
null0pointer 4y ago
This is pretty clearly not a failure of cryptocurrency. Bitcoin et al. are still chugging along just fine. This is, once again, a failure of a centralized business in which people placed way too much trust. I hope SBF, and other "crypto" company execs, are held accountable for misleading customers about their offerings. Specifically calling it crypto when it's not.
- scoofy 4y ago
  This is good for Bitcoin.
- dist1ll 4y ago
  That's what people don't get. FTX' spectacular failure is literally an advertisement for decentralization.
  - mlinhares 4y ago
    The "no true Scotsman" is such an old and failed defense for crypto. Not even the believers believe in it anymore.
    - zeroclip 4y ago
      What? FTX is a centralized custodian. It is in competition with DeFi protocols.
- VHRanger 4y ago
  Bitcoin failed, though? All the proposed usecases except speculation and censorship resistant wealth transfers (eg. getting money out of Russia) have been abandoned.
  - bogota 4y ago
    I used bitcoin to remit money to another country just yesterday.
Animats 4y ago
So what happens to crypto now? A reasonably likely possibility is that the SEC starts sending letters to every issuer and exchange that sells to US persons. If you're an issuer, you have to register as a security or get a no-action letter that says yours is a utility token. If you're an exchange or a broker, you have to register as an exchange or a broker. Sign up for FINRA regulation and pay SIPC premiums. They did that to ICO issuers back in 2017, which is why you don't see many ICOs any more. NFTs were a workaround for that, but the SEC has been saying that bulk NFT issues and fractional NFTs are probably securities. The SEC has been reluctant to do this, partly because they were still litigating over whether crypto issues are securities, and partly due to political pressure. Last week, the SEC won SEC vs. LBRY with a decision that crypto is almost always a security. Much of the political pressure came from FTX, which is now a political liability. FTX donated to both Republicans and Democrats. Now, on Capitol Hill, key committee leaders from both parties are against them.[1] The SEC is now ready to act.[2] The crypto industry sees regulation coming and is freaking out. It's not that filing an S-1 is that hard. It's that you have to give all the info crypto issuers like to hide, such as where the money is going, the business plan, and who's running the thing. Under penalty of perjury. (I want to see an S-1 for Yuga Labs (Bored Ape Yacht Club / Otherside). They raised $400 million, printed some pictures, and threw some raves. That could be the most fun S-1 to read since BOYSTOYS.COM did an IPO for a strip club.) There are fewer offshore havens available. China pulled the plug on crypto mining. (Literally. Power was cut to crypto mines.) Cyprus cracked down. Japan, post Mt. Gox, licenses and regulates crypto exchanges. Bahaman regulators were about to take FTX into liquidation. Cyprus cracked down after the binary option debacle. There's still Bulgaria. What will be left after all the sketchy operators are shut down? [1] https://www.cnbc.com/2022/11/11/crypto-meltdown-washington-turns-up-heat-on-crypto-darling-sam-bankman-fried-following-near-collapse-of-ftx.html https://www.cnbc.com/2022/11/11/crypto-meltdown-washington-t... [2] https://finance.yahoo.com/news/sec-chair-gensler-slams-non-143316542.html https://finance.yahoo.com/news/sec-chair-gensler-slams-non-1...
- twblalock 4y ago
  Crypto seems like the kind of risky/novel investment the accredited investor program was designed for. Of course that would kill crypto. In general I’m glad the government let the experiment be run. I was not one of the people saying crypto should be banned, and I’m still not. But at this point I think it should be regulated, for the same reason most other investments are.
ahallock 4y ago
Defi can help. There are still issues with contract vulnerabilities, but I don't think you can get away with the same level of fraud as you can on a CEX, where there's far less transparency.
yieldcrv 4y ago
an opaque shadow bank in the Bahamas crashing has nothing to do with its niche of crypto. try not to conflate the two.
socrates1024 4y ago
Why would this prove the necessity of regulations? This occurred within the realm of regulations, not in the wild west. FTX.US is a regulated entity in the US, and FTX Intl wasn't available to US customers. Doesn't this prove that calamity happens even despite the regulations
themihai 4y ago
2008 was not 19th century though.
twawaaay 4y ago
I red a bunch of financial books including some history of financial systems to learn to invest but also because I am just curious about how we got where we are. It is interesting that the waves that we are experiencing are nothing new, everything has been repeating every 20-40 years for the past three centuries or more. Yeah, bitcoin is nothing new. It is the roughly similar thing happening all over again -- people buying something they absolutely do not understand just because they see the value is going up. Investing is hard and here is this golden opportunity -- just put your money in and see it multiply. And for a long time this works because more people are putting their money in and expecting returns. Then suddenly for whatever reason the positive returns dry up (at the very least you have to run out of new capital at some point) and those same people who were only in to speculate now want to get their money back. But as the first are able to do it, the price starts to fall. Then you get companies or individuals swarming nearby the stream of money because, hey, for every greedy person with capital you will find a greedy person without it. And lots of these people also want to get rich quick. It really is just another pyramid scheme that lures in people who do not understand finances but want to get rich quick (and some who do understand but are just too greedy to pass on the opportunity or play with somebody elses capital), the difference being it looks way more legit and legal because of the number of investors and amount of capital. The cycle length has something to do with how long people remember the previous painful lesson before they forget and do it all over again. Remarkably stable over centuries...
SevenNation 4y ago
This post conveniently ignores the long line of 20th and 21st century banking and finance disasters, which occurred under the watchful eye of Congressionally appointed regulators. One could also argue that the presence of regulators and regulation creates the very problem it tries to solve through moral hazard. As long as there are schmucks with dollar signs in their eyes and little patience to read history, these disasters will continue - with or without regulation.
deleted 4y ago
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- deleted 4y ago
  [deleted]

tasubotadas 4y ago

Why does this need to be regulated? We already have banks for that. And it's not like regulation saved them from being able to become insolvent.

aaronbrethorst 4y ago
I get whiplash wearing a seatbelt when my car gets into a crash. Why should I bother wearing that seatbelt? It didn’t save me from the whiplash!
twblalock 4y ago
Even in 2008, no depositors in FDIC-insured banks lost their money. Some banks died (Washington Mutual comes to mind), but it's not like FTX where the depositors are left with nothing.
- aaronbrethorst 4y ago
  I banked with WaMu in 2008. They died. Chase absorbed them. My account balances moved to Chase and were left 100% intact.
jfghi 4y ago
Because financial fraud isn’t a victimless crime.
- nradov 4y ago
  In this particular instance of fraud it's impossible to feel any sort of sympathy for the "victims". They absolutely deserve their losses.
  - deleted 4y ago
    [deleted]
everfree 4y ago
> it's not like regulation saved them from being able to become insolvent. It may have, in a way. It's too early to tell, but it's possible that FTX's USA-based corporation ("FTX US") is still solvent. I believe it's the Bahamas-based entity that's in bankruptcy - the one that's in an offshore haven not subject to US regulations. Edit: Looks like FTX US is bankrupt too, but still it may or may not be solvent.
- kgwgk 4y ago
  FTX US is included in the bankruptcy proceedings.
  - everfree 4y ago
    Thanks, I just read that elsewhere in this thread.
thinkcontext 4y ago
The US generally protects retail investors from risk like this in other financial instruments and markets. This isn't really different, its just new enough that regulators haven't caught up. This kind of event could speed that up.
hnews_account_1 4y ago
Regulation saved the economy from the worst of it. But this is the kind of uninformed ignorance that is common in these parts. It has been consistently proven that regulation and central banking have prevented the worst of excesses. But live in your own world without reading anything. No one is stopping you.

reaperducer 4y ago

This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like the wild west For those who can read long books, see Anthony Trollope's The Way We Live Now. https://en.wikipedia.org/wiki/The_Way_We_Live_Now https://en.wikipedia.org/wiki/The_Way_We_Live_Now The 2001 television version was also excellent: https://en.wikipedia.org/wiki/The_Way_We_Live_Now_(2001_TV_serial) https://en.wikipedia.org/wiki/The_Way_We_Live_Now_(2001_TV_s... , and only four episodes, instead of 100 chapters.

qudat 4y ago

Hmm, I’m not sure about your conclusion. I would rather see people be more scrutinizing when giving their money to others. It doesn’t matter if there are rules and regulations, people are always going to be duped. When I read about FTX I just think that people need to be better educated. Maybe one could argue that the rules and regulations are specific to providing consumers with tools to make educated decisions about financial investments.

piva00 4y ago
> I would rather see people be more scrutinizing when giving their money to others. "I just wish everyone is better" is never a solution for anything that has mass appeal/is used by the general public. You can't ever depend that individual actions will solve a systemic issue, it's not realistic.
- qudat 4y ago
  The same argument can be made for government intervention. I don’t buy it, there are a ton of examples where not only does the gov get it wrong but also have the opposite effect of what they were trying to achieve. Good intentions is not realistic. The systemic issue is education.
  - piva00 4y ago
    Tell me what systemic issues were solved by individual action. I'd really like to hear examples, I've never found them.

randiantech 4y ago

19th century, or 2008. It’d be same.

rfrey 4y ago
In 2008 depositors got their money back. In the 19th century they lost it.
thinkcontext 4y ago
2008 had a lot of things the 1800s didn't, like the Fed and FDIC, both of which were very busy.

sangnoir 4y ago

> This has been a wonderful social experiment, enabling people who didn’t live in the 19th century to see what happens when banking and investing is treated like the wild west. The only difference is that the bank-analogs do not get to face era-appropriate "frontier justice", but instead get to hide under the skirts of 20th century bankruptcy laws.

Mortiffer 4y ago

FTX was a centralized exchange. Those who believe in trying to build an alternative financial system did not use centralized exchanges except perhaps for on-ramp off-ramp. Uniswap among others has been stable with very audited open code that prevents anyone from doing what FTX did. Just want to remind ppl to not put them in the same bucket.

HDThoreaun 4y ago
You're always going to need a centralized ramp to convert crypto to fiat though. If everyone thinks they're scams crypto has a big problem.
- WontGetFooled 4y ago
  You can "buy cash" right now in amount from $100 to $1M on most d-web exchanges. Decentralized versions like Open Bazaar have worked for years just no one uses them so its more expensive and less choice. Decentralized on/off ramps have existed for a LONG time and the fist was a key reason Bitcoin Core (BTC) broke away from the Bitcoin roadmap and became more of an "alt-coin" than the Bitcon we started with. Many think "SegWit" was a hack desigend to inject malicious code into Bitcoin Core to make these types of decentralized exchanges more difficult but then Vitalik just said fuck the US Government and came out with Ethereum.
- dist1ll 4y ago
  Yeah, but the conversion happens very quickly. Deposit, trade, withdraw. Unfortunately, people leave tons of money on exchanges, for long periods of time. That's the problem. That's what the majority of exchange users are doing.
  - stouset 4y ago
    People leave money on exchanges because the alternatives are worse. They're almost as dangerous (if not more so): how many people have lost millions or billions due to malware, forgotten passwords, failed hard drives, death of the owner and inability to transfer that wealth to their heirs, etc.? All of these problems are solvable with ludicrous levels of complication and confusion, and the average person doesn't even realize they need to take these sorts of measures until they've irrecoverably lost everything.

barkingcat 4y ago

even the idea of "declaring bankruptcy" is a modern regulated construct. In medieval times, if you "declare bankruptcy" your family and dependents get sold into slavery and your wife is sold off to the highest bidder who will buy your debt. In many previous times, if you couldn't pay debts you'd just be killed.

jrumbut 4y ago
This idea of auctioning off someone's wife seemed (seems) unlikely to me in a medieval European context (since divorce was hard to come by). What I found was actually weirder: > In medieval Italy and southern France, it was common for the cedens to stand nude but for his shirt and strike a stone with his posterior ('vituperii lapis') while declaring 'cedo bonis'." The patent purpose of this ceremony was as much to satisfy the anger and frustration of creditors as to publicize the debtor's bankruptcy. http://www.mgh-bibliothek.de/dokumente/b/b071148.pdf http://www.mgh-bibliothek.de/dokumente/b/b071148.pdf
- santoshalper 4y ago
  The medieval version of "I Declare Bankruptcy!!!"
lazide 4y ago
Well, those 'previous times' where you just got killed ran concurrent too those slavery times. And if you borrow money from the wrong people today, it can still happen.
spaceman_2020 4y ago
They literally had debtor’s prisons when Charles Dickins was still writing!

derangedHorse 4y ago

It seems like you're conflating the value of crypto with the recent blunders of crypto-focused businesses. The fundamental value of cryptocurrency is being able to self-custody tokens of value without relying on any other mechanism besides the proper functioning of the blockchain and its respective rules. What we're seeing here is a lack of clarity/regulation amongst world governments on how crypto and the businesses that manage them should be treated. The promise of DeFi has a higher barrier of entry for those unfamiliar with the technicalities of interacting with decentralized systems, but they generally have more transparency in management of funds than crypto-centric businesses. All code running on the blockchain can be audited and so can the funds held within smart contracts. There are plenty of valid criticisms that can be made of various cryptocurrencies with those models of on-chain finance (and even with the value of cryptocurrencies themselves), but criticism of cryptocurrencies deriving from bad businesses that manage them shouldn't be one of them in my opinion.

jfk13 4y ago
> The fundamental value of cryptocurrency is being able to self-custody tokens of value Like dollars under my mattress? Sure, self-custody can be useful sometimes. But (almost) anyone with substantial quantities of "tokens of value" generally appreciates that delegating custody of them to a (regulated and insured) institution provides a lot of both convenience and protection that's difficult to replicate with "self-custody".

pclmulqdq 4y ago

This is the downright civilized version of what happens in the financial wild west. SBF will likely keep possession of his entrails and his head.

everfree 4y ago

I don't see why crypto is incompatible with regulation and institutions. Crypto is a unit of account, not some magical lawless thing that's doomed to never have a regulation written about it. In fact, places like New York already have pretty strict regulations requiring specific licenses for crypto-related businesses. Crypto crises like these are in general due to regulation not having caught up yet, not because companies that involve crypto are inherently un-regulatable. Crypto is speed-running banking regulation over again. It's an ugly process, but the end result will be crypto institutions that are strictly regulated like banks (and/or existing banks will start to handle crypto just like they do any other foreign currency balance). As for the current state of things, FTX is (was) a Bahamas company not subject to the financial oversight of the general western world. The public would generally hesitate to wire large amounts of money off to some company in the Bahamas, but when it's crypto, people don't think twice about it for some reason. After the FTX blow-up, perhaps more people will. It's hard to prevent people from wiring money off to a company in some other country that has much looser financial regulations, but that's not a crypto problem, it's a financial education problem.

lupire 4y ago
Crypto is naturally globally networked. What jurisdiction could it be in?
- everfree 4y ago
  The internet is also naturally globally networked, and it's regulated in every jurisdiction. When a packet hops from one country to another, it's bound by a different set of laws. Same thing with an international financial transaction, crypto or otherwise.
- martin8412 4y ago
  Banking is largely globally networked as well, at least in the West.
bwestergard 4y ago
Why bother with proof of work or proof of stake mechanisms if you want political regulation? In that case, you might as well empower a state's central bank to develop a payment mechanism, and task them with ensuring fairness and enforcing laws around taxes, illegal activity, etc.

127 4y ago

Bitcoin is neither banking or investing. It's a decentralized ledger. I for one am not very excited to continue using the legacy systems with countless of middle men and entrenched rent seekers to extract the maximum they can out of the completely legal trades I do with other consenting individuals.

supdup 4y ago

Protectionist government is the only reason why societies would need to go through cycles of repeating the experiment. When they are protected, they forget how to protect themselves... from their own decisions.

RobRivera 4y ago

maybe the real true value of crypto was the frens we made along the way

xxEightyxx 4y ago

dang 4y ago
> What a wonderfully ignorant statement to make. Can you please make your substantive points without personal attacks or name-calling? Your comment would be fine without this bit. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

dsco 4y ago

Institutions funded FTX - what are you on about with your very wordy but empty post?

seydor 4y ago

Or maybe it is the opposite? Why did (institutional) investors trusted and funded this ... thing so much? Maybe the fact that the Founder was literally born inside academic elites has something to do with it? The guy who is supposed to have "won" this , is running an exchange apparently banned by china, largely disliked by regulators and disinvited by governments, and not funded by any government or large investors, right?

null0pointer 4y ago

This is pretty clearly not a failure of cryptocurrency. Bitcoin et al. are still chugging along just fine. This is, once again, a failure of a centralized business in which people placed way too much trust. I hope SBF, and other "crypto" company execs, are held accountable for misleading customers about their offerings. Specifically calling it crypto when it's not.

scoofy 4y ago
This is good for Bitcoin.
dist1ll 4y ago
That's what people don't get. FTX' spectacular failure is literally an advertisement for decentralization.
- mlinhares 4y ago
  The "no true Scotsman" is such an old and failed defense for crypto. Not even the believers believe in it anymore.
  - zeroclip 4y ago
    What? FTX is a centralized custodian. It is in competition with DeFi protocols.
VHRanger 4y ago
Bitcoin failed, though? All the proposed usecases except speculation and censorship resistant wealth transfers (eg. getting money out of Russia) have been abandoned.
- bogota 4y ago
  I used bitcoin to remit money to another country just yesterday.

Animats 4y ago

So what happens to crypto now? A reasonably likely possibility is that the SEC starts sending letters to every issuer and exchange that sells to US persons. If you're an issuer, you have to register as a security or get a no-action letter that says yours is a utility token. If you're an exchange or a broker, you have to register as an exchange or a broker. Sign up for FINRA regulation and pay SIPC premiums. They did that to ICO issuers back in 2017, which is why you don't see many ICOs any more. NFTs were a workaround for that, but the SEC has been saying that bulk NFT issues and fractional NFTs are probably securities. The SEC has been reluctant to do this, partly because they were still litigating over whether crypto issues are securities, and partly due to political pressure. Last week, the SEC won SEC vs. LBRY with a decision that crypto is almost always a security. Much of the political pressure came from FTX, which is now a political liability. FTX donated to both Republicans and Democrats. Now, on Capitol Hill, key committee leaders from both parties are against them.[1] The SEC is now ready to act.[2] The crypto industry sees regulation coming and is freaking out. It's not that filing an S-1 is that hard. It's that you have to give all the info crypto issuers like to hide, such as where the money is going, the business plan, and who's running the thing. Under penalty of perjury. (I want to see an S-1 for Yuga Labs (Bored Ape Yacht Club / Otherside). They raised $400 million, printed some pictures, and threw some raves. That could be the most fun S-1 to read since BOYSTOYS.COM did an IPO for a strip club.) There are fewer offshore havens available. China pulled the plug on crypto mining. (Literally. Power was cut to crypto mines.) Cyprus cracked down. Japan, post Mt. Gox, licenses and regulates crypto exchanges. Bahaman regulators were about to take FTX into liquidation. Cyprus cracked down after the binary option debacle. There's still Bulgaria. What will be left after all the sketchy operators are shut down? [1] https://www.cnbc.com/2022/11/11/crypto-meltdown-washington-turns-up-heat-on-crypto-darling-sam-bankman-fried-following-near-collapse-of-ftx.html https://www.cnbc.com/2022/11/11/crypto-meltdown-washington-t... [2] https://finance.yahoo.com/news/sec-chair-gensler-slams-non-143316542.html https://finance.yahoo.com/news/sec-chair-gensler-slams-non-1...

twblalock 4y ago
Crypto seems like the kind of risky/novel investment the accredited investor program was designed for. Of course that would kill crypto. In general I’m glad the government let the experiment be run. I was not one of the people saying crypto should be banned, and I’m still not. But at this point I think it should be regulated, for the same reason most other investments are.

ahallock 4y ago

Defi can help. There are still issues with contract vulnerabilities, but I don't think you can get away with the same level of fraud as you can on a CEX, where there's far less transparency.

yieldcrv 4y ago

an opaque shadow bank in the Bahamas crashing has nothing to do with its niche of crypto. try not to conflate the two.

socrates1024 4y ago

Why would this prove the necessity of regulations? This occurred within the realm of regulations, not in the wild west. FTX.US is a regulated entity in the US, and FTX Intl wasn't available to US customers. Doesn't this prove that calamity happens even despite the regulations

themihai 4y ago

2008 was not 19th century though.

twawaaay 4y ago

I red a bunch of financial books including some history of financial systems to learn to invest but also because I am just curious about how we got where we are. It is interesting that the waves that we are experiencing are nothing new, everything has been repeating every 20-40 years for the past three centuries or more. Yeah, bitcoin is nothing new. It is the roughly similar thing happening all over again -- people buying something they absolutely do not understand just because they see the value is going up. Investing is hard and here is this golden opportunity -- just put your money in and see it multiply. And for a long time this works because more people are putting their money in and expecting returns. Then suddenly for whatever reason the positive returns dry up (at the very least you have to run out of new capital at some point) and those same people who were only in to speculate now want to get their money back. But as the first are able to do it, the price starts to fall. Then you get companies or individuals swarming nearby the stream of money because, hey, for every greedy person with capital you will find a greedy person without it. And lots of these people also want to get rich quick. It really is just another pyramid scheme that lures in people who do not understand finances but want to get rich quick (and some who do understand but are just too greedy to pass on the opportunity or play with somebody elses capital), the difference being it looks way more legit and legal because of the number of investors and amount of capital. The cycle length has something to do with how long people remember the previous painful lesson before they forget and do it all over again. Remarkably stable over centuries...

SevenNation 4y ago

This post conveniently ignores the long line of 20th and 21st century banking and finance disasters, which occurred under the watchful eye of Congressionally appointed regulators. One could also argue that the presence of regulators and regulation creates the very problem it tries to solve through moral hazard. As long as there are schmucks with dollar signs in their eyes and little patience to read history, these disasters will continue - with or without regulation.

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