Do you regulate crypto? It’s about time.

If you’re a cryptocurrency executive, entrepreneur, or any kind of mover and shaker in that arena, you’re probably not very happy right now. You hoped – and planned – for a 2023 bounce back from 2022, which was a disaster of a year, as we all know.

After a steep drop in the global value of cryptocurrency – from a peak of $3.2 trillion in November 2021 to a crash landing of $835 billion in December 2022, a drop of 74% – you’ve seen a rebound to $1.18 trillion dollars. So you move on. Given how you’ve been able to maneuver access to the currency, control its extraction and manipulate the trade in it – well, of course, you’d have reason to anticipate a big year. Maybe not a Sam Bankman-Fried year, but big, nonetheless.

Regulations… Finally

Well, not until you restarted the party, until some unexpected guests showed up: regulators and other government officials – all of whom were expected. And they’re not going to go away. Considering the way you’ve operated all along, is this any surprise? You may not have seen this coming yet, but wasn’t this the other shoe that hadn’t yet dropped? You had to know this would happen sometime, right? Just not now. Not before more monkey business can ensue, right?

Don’t think I’m naive. I know as well as anyone that cryptocurrency is here to stay. That’s why the future never looks like the past. But I also know that while a select few made mountains of money on the crypto exchanges, a whole lot lost their shirts faster than they could order a new one on Amazon Prime. In every market or stock exchange there are winners and losers – as The Grateful Dead reminds us St. Stephen: “Talk about your abundance, talk about your diseases; one man gathers up what another man spills.”

So why did the regulators from the SEC show up? And why did they impose fines and other penalties on crypto lending companies? At the same time, why did federal banking officials issue strict policy statements that made it more difficult for you to participate in regular banking systems? And why, if you are not naive either, can you expect more intensified steps?

Rules: So impractical!

Because you haven’t played by the rules, and the few rules you have are barely rules at all, and let all of this be, however you like to spin it, transparent and decentralized. That depiction is fine for the gullible, but in truth opens up all sorts of tricks from shady and/or nefarious players (Bankman-Fried is not the last). And that line about decentralization, who falls for it? There is plenty of historical evidence to support the concept of centralization, and here is some of it.

Valuta’s 5,000-year success

In the currency’s 5,000-year history, decentralization was never what made it work. The success of currency – and currency – was the confidence that two or more parties to a transaction had in the lasting value of currency – and in who handled it. It wasn’t people like Sam Bankman-Fried or organizations like FTX.

Around 3000 BC in Mesopotamia, when currency was established as a representative of equivalent value, great emphasis was placed on stewardship. Standards were set and met, regulation and accountability were respected. Currency stores – in the form of grain, perhaps – eventually became the forerunners of what we call central banks, and enabled the trade routes. All in all, the success of currencies over the years was not achieved by decentralization, but by making currencies more aligned with each other. During these five millennia, global institutions and systems were built, and have they been examples of honorable behavior? Come on. But they didn’t lead us to the Apocalypse either.

Crypto executives and industry associations are circling the wagons claiming they are under attack – a prime example of chutzpah. That, in case you don’t recognize it, the Yiddish word for nerve is actually, unlimited bile. The classic example of chutzpah is the man who murders both parents and asks the court for mercy because he is an orphan.

For cryptocurrency to remain a player in the global financial system, regulation and compliance are a must. Otherwise, a swarm of angry and insatiable government watchdogs and regulators just won’t go away.

Some party.