Make Threatened Crypto Platforms Fail Instead of Saving Them

As the crypto market goes through a difficult but anticipated period, the cohort of platforms at risk is overshadowing an already bleak environment. The point is not to disgrace the entire ecosystem, as certain principles of the traditional order do to impose murderous rules, but to wonder what to do with these key actors of the latter running of the bulls who reproduced the worst aspects inherited from the traditional financial system, and made risky bets with their clients’ money. From this point of view, two visions clash: that of a major market player supporting their bailout and that of a pro-crypto regulator that refuses to save structures using questionable practices.

FTX in support

On the one hand, there’s Sam Bankman-Fried, the boss of FTX, who sees it as his responsibility to help crypto companies in crisis† For him, it’s about preventing bad debt from spreading across the industry† FTX also fit the bill, providing the rather ailing cryptocurrency lender BlockFi with a $250 million revolving loan. Last week, it was the CEO’s young and ambitious trading company, Alameda Research, that came to the rescue of Canadian crypto broker Voyager Digital. At stake is a $200 million USDC loan and a 15,000 bitcoin “revolving line of credit” to “use as needed to protect customers’ assets.”

Favorable interventions? This is not necessarily the view of everyone and in particular of Heister Peirce, one of the commissioners of the US Securities and Exchange Commission (SEC). She is known for her pro-crypto stance and has spoken out against saving failing companies. From his point of view, it’s better to “make these things happen” to create a more sustainable industry.

A laissez-faire SEC commissioner

In particular, she said in an interview with Forbes that it was the contrary an opportunity to assess the functioning of the crypto market under acute stress

It is useful for us to see the connection points. This is a learning opportunity not only for market parties, but also for regulators, so that we can get a better picture of how the market works.

Heister Pierce, SEC Commissioner, in Forbes

However, since the SEC is not authorized by Congress to be a systemic risk regulator, it believes that: the authority does not need to intervene to rescue over-indebted companies that have not applied the traditional principles of risk management

Crypto has no rescue mechanism. And that was seen as one of the strengths of this market. I don’t want to come in and say we’re going to try and find a way to save you if we don’t have the power to do it.

Heister Pierce, SEC Commissioner, in Forbes

Education in the crypto ecosystem: an essential prerequisite

She’s not shy to point the finger either the responsibility of individual investors who, blinded by miraculous yields, have lost their sense of proportion.

When you have an attractive return, should you ask yourself questions about the associated risks? And if you don’t get any answers, you have to ask yourself whether you want to make that investment.

Heister Pierce, SEC Commissioner, in Forbes

Education in this new ecosystem is of course a precondition for any investment† A principle that is tirelessly repeated by the actors of the ecosystem itself, but which is far from being adopted by newcomers.

This carelessness or laziness in learning, leading to tragedies such as we currently experience with people losing some or all of their savings, gives regulators the opportunity to impose the idea of ​​authorizing only accredited investors to participate in cryptocurrencies. investments† Rule that already exists in traditional finance, especially in the United States after the 1929 crash and the “Great Depression” that followed, and which some would like to see applied to the crypto industry. Several jurisdictions have made efforts in this direction. Thailand and Hong Kong broken down, Singapore more successful.

Regulation could take advantage of the current chaotic situation in the crypto industry to impose unfair rules

In fact, if the crypto industry is still experiencing episodes of this shady series that currently features it, regulators and legislators could very well pass drastic regulations that naturally go against a popular crypto i.e. made for the people and not reserved for an already wealthy elite

In other words, under the user protection argument, the rich would have the opportunity to get even richer, while the poorest would no longer have access to this possible path to financial autonomy. Also to escape this logic of dominance with on the one hand qualified investors with qualities that can lead them to make informed bets, avoid scams and who can afford to lose money in the event of a breakdown, and on the other hand, the “ordinary” investors who do not know how to “do” with their money, it is necessary to walk the path of independence. Know, learn to manage your famous private keys yourself (it’s easier than it looks) and stop relying on centralized structures that release themselves from all responsibility when things go wrong

Crypto’s Troubled History Takes a New Turn

Well, to end on a more optimistic note, note that in the fledgling history of cryptocurrencies (13 years), this is not the first time the ecosystem has experienced such episodes. Perhaps the most resounding was the bankruptcy of the Mt Gox stock exchange in 2014, which left thousands of investors on the brink.

History to a lesser extent repeated each cycle with dozens of exchanges or platforms disappearing almost overnight. But no offense to those announcing the umpteenth death of Bitcoin and others, the industry has always recovered from these deplorable episodes† Only today we will have to deal with more or less enlightened regulators, determined to exercise control that is sometimes abusive, like the European hussars for example. The history of cryptos is taking a new turn, but it is not over yet.

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