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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

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.
- santoshalper 4y ago
  Wouldn't that be crazy!?
- everfree 4y ago
  You're right in that if all we wanted was a domestic payment network, blockchain consensus mechanisms would be overkill and introduce unneeded overhead. Personally, I'm excited about the FedNow payment service coming online in the USA next year. Perhaps I'll finally be able to easily send money from bank to bank without involving third party fintechs like PayPal and Venmo, and without waiting a day or two for ACH. However, crypto is useful because it standardizes behavior across regulatory boundaries, and because it creates a stateless unit of account. Standardizing behavior across regulatory boundaries means that crypto "just works" to send value from one country to another, without needing cross-border intermediary companies that support your specific country pair to convert things between currencies/systems. The stateless unit of account part is perhaps more interesting to me, though. Before crypto, there were no digital representations of value independent from state. No country has the power to hyperinflate crypto, and there doesn't seem to be a clear path to be able to accomplish a unit of account like that through traditional political means. The closest thing we have to that is the Euro, but it doesn't tick all the boxes. Is a stateless unit of account good, or better than traditional government currencies? I'm honestly not sure. It does have some drawbacks in terms of the ability to use monetary policy to loosen and tighten markets. But it's an interesting enough concept that I would say it's worth it to "bother" with blockchain consensus technology.
  - bwestergard 4y ago
    We can have an international unit of account through, e.g. Special Drawing Rights. This makes plain the political bargains struck to ensure international economic stability. Crypto alternatives would have the same political valence as a return to the gold standard, which was abandoned to avoid the crisis potentials peculiar to it. The most influential statement of your proposal is Hayek's article "Choice in Currency: A Way To Stop Inflation"[1] which he later expanded on in "Denationalisation of Money". Hayek's views have an admirable internal consistency, but his political premises are contrary to the core values of almost every pre-industrial society, and of the social democratic tradition in Europe which has been internationally influential. Very few people understand the full scope of Hayek's political vision, which is premised on a thoroughgoing skepticism toward the very possibility of rational democratic deliberation. If they fully understood his proposal's implications, I doubt they'd support them; but certainly there are some who are willing to fully own their anti-democratic implications. 1: https://iea.org.uk/publications/research/choice-in-currency-a-way-to-stop-inflation https://iea.org.uk/publications/research/choice-in-currency-...
lazide 4y ago
Crypto is incompatible with regulation and institutions because it was designed to be, and is consistently a part of the ethos espoused by pretty much all crypto players? Literally, the first sentence in the Bitcoin whitepaper (which arguably kicked off 'crypto' as a thing) is "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution". [https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf] I mean, seriously?
- stripedfish7 4y ago
  I don't understand your point. My grandfather tries to use only cash which allow 'payments to be sent directly from one party to another without going through a financial institution'.
  - WontGetFooled 4y ago
  - adastra22 4y ago
    And that is arguably the simplest explanation of what bitcoin is: digital cash.
    - brk 4y ago
      Which by definition is fundamentally impossible to do transfers without a middle man of some kind.
      - adastra22 4y ago
        Bitcoin has no middleman.
        salawat 4y ago
        Cash doesn't announce your balance to the world...
Lonestar1440 4y ago
Once you accept the necessity of middlemen, known counterparties, and regulators; what's the point of Crypto?
- adastra22 4y ago
  Businesses operating as custodians should be subject to all the usual banking regulations. They are holding other people’s money. But that’s not crypto, that’s just a crypto-related service.
- dlubarov 4y ago
  Regulated exchanges are just onramps; once the user takes custody of their funds they become free to transact without middlemen.
deleted 4y ago
[deleted]
hotcoffeebear 4y ago
What you regulate; cryptocurrency exchanges, cryptocurrencies or decentralized exchanges?
- everfree 4y ago
  Companies, of course. Edit: Businesses, more specifically.
  - ohgodplsno 4y ago
    So I could become a trusted individual and handle hundreds of millions of dollars in transactions through my homegrown exchange (read: I cloned a git repository) and I will not be regulated because I'm not a company? Sounds like a solid plan.
    - everfree 4y ago
      Buying and selling property is a tricky thing, legally. To buy and sell cars in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling cars to other individuals, that's illegal to do without a licensed corporation. To buy and sell gold in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling gold to other individuals, that's illegal to do without a licensed corporation. It all comes down to whether the government deems something to be a personal activity or a business activity. Handling hundreds of millions of dollars worth of trades may well be considered a personal activity, if you're rich and making a series of OTC trades with a friend. But if you're attracting a diverse customer base and making a business out of it, that's when regulations apply. A great example of the murkiness of this distinction was the crackdown on localbitcoins. It wasn't the people doing one-off personal trades who got in trouble, it was the people profiting off of volume, doing many trades and capturing the spread. The people who traded with several counterparties, but maybe not enough to be considered a business - well, that's where the gray area lies and personally, I am not a big fan of that gray area.
      - 4y ago
UncleEntity 4y ago
> 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 headline says filing for US bankruptcy so I’m assuming they have some US based entity — which as of yesterday was perfectly solvent because the accounts weren’t commingled. So one would presume (without actually reading TFA) that they are indeed subject to US financial oversight and have some explaining to do to the people in charge of those sorts of things.

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.

santoshalper 4y ago
Wouldn't that be crazy!?
everfree 4y ago
You're right in that if all we wanted was a domestic payment network, blockchain consensus mechanisms would be overkill and introduce unneeded overhead. Personally, I'm excited about the FedNow payment service coming online in the USA next year. Perhaps I'll finally be able to easily send money from bank to bank without involving third party fintechs like PayPal and Venmo, and without waiting a day or two for ACH. However, crypto is useful because it standardizes behavior across regulatory boundaries, and because it creates a stateless unit of account. Standardizing behavior across regulatory boundaries means that crypto "just works" to send value from one country to another, without needing cross-border intermediary companies that support your specific country pair to convert things between currencies/systems. The stateless unit of account part is perhaps more interesting to me, though. Before crypto, there were no digital representations of value independent from state. No country has the power to hyperinflate crypto, and there doesn't seem to be a clear path to be able to accomplish a unit of account like that through traditional political means. The closest thing we have to that is the Euro, but it doesn't tick all the boxes. Is a stateless unit of account good, or better than traditional government currencies? I'm honestly not sure. It does have some drawbacks in terms of the ability to use monetary policy to loosen and tighten markets. But it's an interesting enough concept that I would say it's worth it to "bother" with blockchain consensus technology.
- bwestergard 4y ago
  We can have an international unit of account through, e.g. Special Drawing Rights. This makes plain the political bargains struck to ensure international economic stability. Crypto alternatives would have the same political valence as a return to the gold standard, which was abandoned to avoid the crisis potentials peculiar to it. The most influential statement of your proposal is Hayek's article "Choice in Currency: A Way To Stop Inflation"[1] which he later expanded on in "Denationalisation of Money". Hayek's views have an admirable internal consistency, but his political premises are contrary to the core values of almost every pre-industrial society, and of the social democratic tradition in Europe which has been internationally influential. Very few people understand the full scope of Hayek's political vision, which is premised on a thoroughgoing skepticism toward the very possibility of rational democratic deliberation. If they fully understood his proposal's implications, I doubt they'd support them; but certainly there are some who are willing to fully own their anti-democratic implications. 1: https://iea.org.uk/publications/research/choice-in-currency-a-way-to-stop-inflation https://iea.org.uk/publications/research/choice-in-currency-...

lazide 4y ago

Crypto is incompatible with regulation and institutions because it was designed to be, and is consistently a part of the ethos espoused by pretty much all crypto players? Literally, the first sentence in the Bitcoin whitepaper (which arguably kicked off 'crypto' as a thing) is "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution". [https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf] I mean, seriously?

stripedfish7 4y ago
I don't understand your point. My grandfather tries to use only cash which allow 'payments to be sent directly from one party to another without going through a financial institution'.
- WontGetFooled 4y ago
- adastra22 4y ago
  And that is arguably the simplest explanation of what bitcoin is: digital cash.
  - brk 4y ago
    Which by definition is fundamentally impossible to do transfers without a middle man of some kind.
    - adastra22 4y ago
      Bitcoin has no middleman.
      - salawat 4y ago
        Cash doesn't announce your balance to the world...

Lonestar1440 4y ago

Once you accept the necessity of middlemen, known counterparties, and regulators; what's the point of Crypto?

adastra22 4y ago
Businesses operating as custodians should be subject to all the usual banking regulations. They are holding other people’s money. But that’s not crypto, that’s just a crypto-related service.
dlubarov 4y ago
Regulated exchanges are just onramps; once the user takes custody of their funds they become free to transact without middlemen.

deleted 4y ago

[deleted]

hotcoffeebear 4y ago

What you regulate; cryptocurrency exchanges, cryptocurrencies or decentralized exchanges?

everfree 4y ago
Companies, of course. Edit: Businesses, more specifically.
- ohgodplsno 4y ago
  So I could become a trusted individual and handle hundreds of millions of dollars in transactions through my homegrown exchange (read: I cloned a git repository) and I will not be regulated because I'm not a company? Sounds like a solid plan.
  - everfree 4y ago
    Buying and selling property is a tricky thing, legally. To buy and sell cars in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling cars to other individuals, that's illegal to do without a licensed corporation. To buy and sell gold in a personal capacity, you don't need a license. But if you run a business with the intent of making a profit by buying and selling gold to other individuals, that's illegal to do without a licensed corporation. It all comes down to whether the government deems something to be a personal activity or a business activity. Handling hundreds of millions of dollars worth of trades may well be considered a personal activity, if you're rich and making a series of OTC trades with a friend. But if you're attracting a diverse customer base and making a business out of it, that's when regulations apply. A great example of the murkiness of this distinction was the crackdown on localbitcoins. It wasn't the people doing one-off personal trades who got in trouble, it was the people profiting off of volume, doing many trades and capturing the spread. The people who traded with several counterparties, but maybe not enough to be considered a business - well, that's where the gray area lies and personally, I am not a big fan of that gray area.
    - 4y ago

UncleEntity 4y ago

> 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 headline says filing for US bankruptcy so I’m assuming they have some US based entity — which as of yesterday was perfectly solvent because the accounts weren’t commingled. So one would presume (without actually reading TFA) that they are indeed subject to US financial oversight and have some explaining to do to the people in charge of those sorts of things.