No, not really

In fact, Hell No!

Cryptocurrency regulation is needed to stop the next FTX-style implosion spilling over into a wider financial crash, the deputy governor of the Bank of England has said.

Sir Jon Cunliffe said Britain should “continue to bring these activities and entities within regulation”, including “most obviously, the need to protect consumers”.

If FTX – or any of the others – had been inside the regulatory boundaries then they would have been tied in with the regular banking system. Which would have meant considerable contagion. As it is we’re able to leave it outside and allow it all to go bust. Sure, $3 trillion – or whatever – is real money but it’s not a systemic problem even if the entire sector evaporates. We can leave that wild west to sort itself out, either into useful legality or into business. But if it had been inside the curtains of the system then we’d have a very much larger problem.

Bring it under the King’s Law after the frontier has been conquered, not before or while.

24 thoughts on “No, not really”

  1. Gordon Brown bailed out the rate tarts who’d put their money into Icelandic banks. That was the first error in this business cycle.
    There will be calls to indemnify the losers from cryptomageddon, which must be resisted. Capitalism wasn’t invented to make fools rich.

  2. The fact that they want to regulate something they have always officially declared to be of null value, not a currency, akin to Collectibles, etc… , tells me someone(s), somewhere(s), has gambled “invested” WAY too much Real Life™ assets into this non-money to the point that it’s going to really hurt in places they don’t want if the bubble collapses.

  3. Isn’t failing crypto just as anti-inflationary as unravelling QE? Takes real money out of the system and destroys it? After the arms manufacturers, the Ukraine kleptocracy and the democrat party have sent it round a few times in the case of FTX.

  4. Is that $3trillion a real $3trillion or an imaginary $3trillion? The astronomical rise in the fiat/Bitcoin tells this trader that’s a market where there are a lot of prospective buyers & few sellers. Buyers keep bidding the stock up without being able to prise it loose from holders. I’m reminded of the Aussie nickel miner Posiedon of my youth. Traded at about £2 before the strike announcement. Peaked in the high 120’s before it occurred the extraction costs a thousand miles from any water were less than economic. So the trading pattern: A certain amount of shares changed hands at the bottom thanks to profit takers selling to punters. Far less on the way up as bidders couldn’t unstick holders from the shares. Who sells anything going up like a rocket? Then reality dawned at the top & it reversed. Hopeful profit takers found there was little interest in taking the stock & the share price fell off a cliff. OK, if you looked at portfolio valuations over the period there were severe losses at the end. But those were the same portfolios were showing marvellous profits at the peak, having held it all the way up. The real losses were far smaller.
    So how much of this applies to something like Bitcoin? It’s the problem of using fiat as a metric for BC. As I’ve said before “value” is always a fantasy figure because it’s based on bid/offer which are deals that haven’t happened based on price which is historic unique event.
    As the BC price rises, BC values balloon. But that isn’t real fiat. It only becomes real fiat if it’s sold in exchange for fiat. So how much of that was actually happening? Volume/total issuance?

  5. Yes, Posieden is a good analogy.Much of the $3 trillion is just that, an asset rise, not a cash input. So too the fall.

  6. TomJ said:
    “The rate tarts who failed to get out of Iceland in time.”

    What was the point of getting out once it was guaranteed?

    I left mine in, it went bust (which was clearly very likely some time before), I got not just my deposit paid by the government, but also the excessively high interest rate, right up to the day it went under.

    Ridiculous system, encourages bad decisions, but since that’s the system we’re paying one might as well extract the maximum from it,

  7. Also worth bearing in mind that at the fiat/BC interface this has to be a zero sum game. One person’s loss will always be another person’s profit. So it’s not $3trillion that’s suddenly vanished. It’s just been redistributed. If it existed.

  8. Yeah, it is Tim. Cousin Rob’s father was one of the few people I knew bought it near the bottom & sold it near the top. 1000 shares if I remember rightly. Fine bit of insider trading. Most of the champaign buyers in Birch’s were still holders when it fell off the cliff.
    Most of the profits were incremental. Thus so were the losses.

  9. ” So it’s not $3trillion that’s suddenly vanished. It’s just been redistributed.”

    Surely by definition no cash has been lost from the entire financial system due to the FTX crash? Any fiat cash paid in by punters has gone to someone else, somewhere. Probably not the people who it should have done, or who are now owed it, but no cash has been destroyed, just as you say, redistributed. Maybe Paul Pelosi has some of it now, who knows?

    All that has been destroyed is unrealised value. Bitcoins people bought for 2X and once worth 3X are now only worth X, or indeed are now worth zero to the owner because they’ve been stolen and someone else has them now. But the 2X in cash is still in the financial system somewhere. Just as if you own a gold bar and someone steals it, your loss is large, but the bar still exists, and is someone else’s gain. Or FTT tokens bought for cash are now worthless. A bit of a blow to the token holder for sure, but when Jack buys ‘magic’ beans with his cash, and discovers they are worthless is the financial system in peril? No, because the cash is still there in the scammers pocket.

  10. Well we can be pretty sure it’s not with Bankman-Fried because his billions evaporated & he’s skint. Branden’s copped a few million in real money.

  11. @Jim
    The problem’s that weasel word “value” when the only thing that’s real is price. You can safely use it with investment quality shares or bonds because the actual volumes being traded are tiny percentage of the issuance. Buyers & sellers roughly match. It becomes increasingly meaningless the more speculative the market is. Is there actually a buyer if you with to realise the value of what you hold & at what price? With Bitcoin, where it’s almost entirely speculative, the concept of value is meaningless.

  12. “Well we can be pretty sure it’s not with Bankman-Fried ”

    I wouldn’t be so sure about that. A man with a secret back door into the bank vault probably isn’t going to leave with nothing as its crashing around his ears.

  13. Totally agree Tim. With crypto outside of the established financial markets if any of it crashes nobody in the real economy cares. It’s far too wild west at the moment. For now it can be an interesting experiment to watch from the sidelines.

  14. @TW

    Indeed

    For anyone with the time and patience unravelling the FTT Blockchain will be very illuminating

    I don’t suppose the FBI will take an interest given SBF’s connections

    At least until the administration changes

  15. Fiat in is fiat out, yes. Problems arise only when you use your cryptocurrency assets as collateral for fiat loans. That’s where the wider contagion emerges.

    In general though, collateral is less liquid (eg. property, business, royalty streams); not highly liquid cryptocurrency.

  16. It’s blockhain. The evidence is in the code of every bitcoin……
    If BF’s swag is still in BC it’s not money. (Defined by being readily exchangeable for goods or services) Now let’s see him try & unload a few billion.
    Make a plot for a good novel. People who do have a lot of cash hanging around are the cartels. BF has conned some dim narco-aristocrats into swapping used $ bills for BC & is now sailing around the Caribbean with 50 tons of paper & a life expectancy measured in minutes. Write him out of that one. Gliders that turn into submarines not allowed but negra girls with big tits are.

  17. “I don’t suppose the FBI will take an interest given SBF’s connections”. He’s only useful as long as he can continue the ‘donations’. Now he can’t, so under the bus he goes. Crooked politicians don’t stay bought.

  18. ” He’s only useful as long as he can continue the ‘donations’. Now he can’t, so under the bus he goes. Crooked politicians don’t stay bought.”

    If he had any sense he’ll have made sure he knows where some Dem skeletons are hidden, they won’t want him spilling any beans. Though that does leave him open to being Epsteined or Arkansided of course……

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