The relation to crypto is that the bulk of crypto is poorly regulated. Some of that is solvable—well regulated exchanges should be possible. The extreme volatility also increases the temptation toward fraud. So the fraud risk is higher than in a well-regulated industry.
I’d submit that a well-regulated and managed exchange is going to find it much harder to achieve a stratospheric valuation, and other parts of crypto are harder to regulate well. So some skepticism toward huge crypto-linked donors is warranted.
More crypto regulation is coming, and many crypto protocols have worked hard already to be regulatory-compliant. But regulation won’t be uniform across jurisdictions; there will always be loopholes that allow regulatory arbitrage.
Some exchanges, such as Coinbase and Kraken, are based and regulated within the US, and are subject to much stricter oversight than FTX—which seems to have been deliberated based in Hong Kong and then the Bahamas precisely in order to avoid US regulatory oversight. (Arguably, this should have been a red flag in terms of EA’s relationship with FTX).
The US, UK, or EU can regulate all they want, but crypto finance is a global business, and there are plenty of less-regulated havens willing to host crypto businesses.
Hopefully crypto investors, traders, and users will become savvier about checking where businesses are operating, and what regulatory scrutiny they’re subject to.
Agreed on that. My point was that it would be a lot harder for an individual to get super-rich quick in a regulated market. No sane regulator is going to allow a regulated party to risk customer assets for the party’s benefit, and few will allow crazy leverage. And the whole thing will require significantly more of a buffer in fiat currency, again limiting any single person’s ability to get megarich.
In short, I think there are few ways for a well-regulated exchange to be stratospherically profitable. So people should not expect the rise of new crypto megadonors who hail from regulated backgrounds.
I would agree with this. Separate from the object-level causes of the current crisis, crypto as an industry has accepted and normalized a lack of accountability that other industries haven’t. And I agree that lack of regulation and high volatility make fraud more likely.
I would want to avoid purely focusing on crypto, because I think the meta-lesson I might take away is less “crypto bad” and more “make sure donors and influential community members are accountable,” whether that be to regulators, independent audits, or otherwise. (And accountable in a real due diligence sense, because it’s easy for that word to just be an applause light.) But yes, skepticism of crypto-linked donors would be justified under this framework.
The relation to crypto is that the bulk of crypto is poorly regulated. Some of that is solvable—well regulated exchanges should be possible. The extreme volatility also increases the temptation toward fraud. So the fraud risk is higher than in a well-regulated industry.
I’d submit that a well-regulated and managed exchange is going to find it much harder to achieve a stratospheric valuation, and other parts of crypto are harder to regulate well. So some skepticism toward huge crypto-linked donors is warranted.
More crypto regulation is coming, and many crypto protocols have worked hard already to be regulatory-compliant. But regulation won’t be uniform across jurisdictions; there will always be loopholes that allow regulatory arbitrage.
Some exchanges, such as Coinbase and Kraken, are based and regulated within the US, and are subject to much stricter oversight than FTX—which seems to have been deliberated based in Hong Kong and then the Bahamas precisely in order to avoid US regulatory oversight. (Arguably, this should have been a red flag in terms of EA’s relationship with FTX).
The US, UK, or EU can regulate all they want, but crypto finance is a global business, and there are plenty of less-regulated havens willing to host crypto businesses.
Hopefully crypto investors, traders, and users will become savvier about checking where businesses are operating, and what regulatory scrutiny they’re subject to.
Agreed on that. My point was that it would be a lot harder for an individual to get super-rich quick in a regulated market. No sane regulator is going to allow a regulated party to risk customer assets for the party’s benefit, and few will allow crazy leverage. And the whole thing will require significantly more of a buffer in fiat currency, again limiting any single person’s ability to get megarich.
In short, I think there are few ways for a well-regulated exchange to be stratospherically profitable. So people should not expect the rise of new crypto megadonors who hail from regulated backgrounds.
I would agree with this. Separate from the object-level causes of the current crisis, crypto as an industry has accepted and normalized a lack of accountability that other industries haven’t. And I agree that lack of regulation and high volatility make fraud more likely.
I would want to avoid purely focusing on crypto, because I think the meta-lesson I might take away is less “crypto bad” and more “make sure donors and influential community members are accountable,” whether that be to regulators, independent audits, or otherwise. (And accountable in a real due diligence sense, because it’s easy for that word to just be an applause light.) But yes, skepticism of crypto-linked donors would be justified under this framework.