© Provided by CNBCI was excited to moderate yesterday's Brookings debate on whether cryptocurrencies should be regulated because, to be honest, I was still undecided.
My youth will definitely come to the table, yes, you match the bozos. Look at all the carnage there. But my oldest is more tired. It seems to me that crypto regulation has less to do with protecting the little guy than whether or not crypto is officially allowed in the mainstream financial system. By "tuning" it, you control it no more than you control it (albeit somewhat). And that seems to me a very dangerous idea.
Finally, the shocking collapse of the cryptocurrency industry, which wiped out the cryptocurrency market and $3 trillion in settlements, had almost no apparent effect on overall financial stability or the economy. Unlike the mortgage crisis of 2006-2007, it had no impact on the central banking system. Let's not forget that mortgages were a very desirable investment back then before they went bust because many of them were underwritten with government backing from Fannie or Freddie.
As such, I sympathize with Stephen Cecchetti's arguments for cryptocurrency deregulation to "effectively let crypto burn." Basically, he believes that the industry, which he claims exists as a form of regulatory arbitrage, will simply disappear with the enforcement of existing regulations (from the SEC to securities regulators, credit and equity banking regulators, etc.). . But I don't agree with him. In some cases, I see real innovation, not just funding by another name.
How else can you explain Strike, for example? Jack Mallers was a frequent guest on our shows. great personality, but what really interests me is his attempt to use Bitcoin to create a competitive and low-cost Visa (domestic) and Western Union (cross-border) payment network. If cryptocurrency remains in regulatory purgatory, I can understand that this could be a headwind to the adoption of technologies like Strike in the US.
In other words, how do you build a regulatory framework that helps real innovation (if you can call it that) like Muller, rather than the personal agenda of Sam Bankman-Fried's defunct FTX? Perhaps the best way to do this is to crack down on the worst cryptocurrency crimes, many of which break old banking laws under the guise of new technology without completely banning real-world practices like Bitcoin.
That's what you can see in our hour-long conversation yesterday.
1) Regulate stable currencies like banks. Do you need a charter; their titles must be nominal; They deal with the costs and hassles of being a bank, regulatory capital controls, etc. in this field. have to deal with it.
2) Do not pass any crypto related laws or regulations at this time. It is too early. As Peter Conti-Brown points out, it took us a century or more to develop adequate legislation to regulate banking and then securities; We should not be too quick to implicate Congress here.
3) Don't create a separate and lightweight "crypto" controller . Instead, force existing authorities to properly implement existing regulations. The SEC, in particular, doesn't look too good here. It's hard to understand why they didn't suppress "characters" like FTT (which fueled the ups and downs of FTX) sooner.
4) Perhaps most obviously, the definition of cryptocurrency needs to be clarified to determine whether it is a security (SEC regulation), a commodity (CFTC), or something else.
5) And finally, keep the banks out. To prevent and/or control any connection between cryptocurrency and the traditional financial system.
I asked our experts if they would like to offer cryptocurrencies as a 401(k) investment option, as many platforms did before the crash. How can and should the "regulation" prevent this? However, according to Steve Cecchetti, sponsors of 401(k) plans have a fiduciary duty and cryptocurrency may violate their "compliance" requirements. "I think we will see a lot of effort.
However, many of our current financial laws can reach cryptocurrency and eliminate its problematic aspects of prohibited practices that re-emerge under new names. But I agree with Peter Conti-Brown that we need to be careful not to completely shut down cryptocurrency innovation, and if we don't completely fix it, we might. According to Hyun Shin's reasoning, I'm not sure that adopting a central bank digital currency instead of cryptocurrency will solve any of these problems.
Cleaning up cryptocurrency so that the financial system becomes less and less vulnerable to a future collapse will be a difficult task.
See you at 13:00.
Kelly:
Twitter: @KellyCNBC
Instagram: @realkellyevans