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The US is a funny country. We have so many financial regulators that sometimes we end up without proper financial laws. The cryptocurrensets represent the most recent models.
The trading of bitcoin and its siblings has grown so large that it can be overlooked – yet that is what has happened. There are no official guarantees on prices, quantity or flexibility. There is no single regulator that oversees crypto exchanges. No one can be sure that some are well protected.
Even people in the libertarian crypto world are wondering what role the government will play. Mike Novogratz, fund manager who helped lead the entry into the financial class, told CNBC “Rest” in the market after the traffic laws were enacted and Congress delegated the task to Gary Gensler, head of the Securities and Exchange Commission.
“The last time Gary speaks, it’ll be all right,” Novogratz said of his former Goldman Sachs colleague. “They would like to regulate all crypto. They have no responsibility.”
All of this leads to legal failure in America. Waiting Gensler to get his hands on the whole crypto has become a Wall Street equivalent to waiting for Godot.
The big problem is that US economic laws are divided. There are a number of bank regulators and market managers, with intergovernmental controls, as well as government regulatory systems. As Jamie Dimon, head of JPMorgan Chase, wrote annual letter to shareholders: “No one has the real power to fix all the moving parts and bridge differences.”
In the long run, this is not necessarily wrong. Checks and scales are like the American ones like apple pie or crumbs; having too many regulators acts as a protection for any of those who disrupt it.
But this system has its limitations. Newer non-fish or bird in a natural way can fall into cracks. Crypto is difficult to manage because it is difficult to interpret. While true believers call the cryptos money, US officials see it differently. For example, Bitcoin is considered a valuable commodity. Some cryptos seem to be secure.
This confusion helps explain why the SEC or Commodity Futures Trading Commission does not directly regulate crypto exchanges like Coinbase. No one has given them this job – which upsets the directors.
Congress, in its own way, is on the case. Elizabeth Warren, Democratic filmmaker, wrote Gensler this month to ask whether the SEC “has the authority to close existing gaps that leave retailers and consumers at risk in this volatile and volatile market”.
Gensler’s response, which will take place on July 28, will no doubt be captivating. But whether it would encourage lawmakers to act swiftly is another matter. If history is any guide, Congress waits for things to go awry before it sets out as it should be in the first place.
The consequences of the mistake amplify the worries that regulators are going through behind them. The crypto trade reminds many freedom fighters on Wall Street of the steady rise in debt-changing debt over the years that led to the financial crisis. Like crypto, CDS was difficult to identify, being a type of insurance that was not managed in this way, and those who promoted it were the ones who considered it best not only under the supervision of governors.
“It took a lot for us to focus on design like CDS,” said Sarah Hammer, dean of Stevens Center for Innovation in Finance at Wharton School of the University of Pennsylvania. “In other words, crypto is more complex than its origin because it falls into different rules.”
Surprisingly for the participants in the crypto markets is that they could have been better off as a police officer if Gensler had already been beaten. Various parties can get to know each other and get to other accommodation. It would be a relief, as Novogratz said.
Now, the best way for regulators to make money in the crypto market could be to come out on an exchange, using all their power to make things right. The SEC has already filed a number of crypto cases. Dan Berkovitz, Commissioner of the CFTC, recently it cast doubt related to the legitimacy of any financial transaction, or “defi”, software that uses blockchain technology to cut through.
It can be a lot of fun. I find myself reminded of the moment in the film All About Eve Bette Davis turned to her guests and presented her upcoming evening show. He tells them: “Tie up your loins, and it will be very hard at night.”
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