Crypto regulation bleg

The standard textbook approach to regulation is that free markets are generally best except for cases of “market failure”. Frequently cited examples of market failure include externalities and monopoly. Now there is a call to regulate the crypto industry:

The White House said Friday it was closely monitoring the collapse of digital-asset empire FTX, citing its bankruptcy filing as proof the cryptocurrency industry required strong regulation.

The White House and other agencies were monitoring the situation, an administration official said, adding that Americans risked getting harmed without proper oversight of cryptocurrencies.

I’m wondering if this is just a knee jerk reaction, or if there is some market failure that I missed. A few comments:

1. It’s perfectly legal for Americans to invest in all sorts of extremely risky ventures, such as biotech start-ups. Most of these firms fail, while a few achieve great success. To use the terminology of administration officials, “Americans get harmed” when risky biotech start-ups fail. Yes, investors understand that biotech is risky, but I’d say the same about crypto.

2. It’s perfectly legal to lend money to high-risk businesses, where the loans may not be repaid. Remember junk bonds?

3. Fraud is already illegal.

So what’s the argument for new regulations of crypto? Surely not the fact that Bitcoin prices have plunged by 75%? Surely not the fact that creditors to FTX are going to lose their money? Surely not that fact that there are accusations of fraud in the recent FTX collapse? These are all either normal parts of our financial system, or are already outlawed by regulation. So what is the specific argument for additional regulation of crypto? To “protect crypto investors”? Why would we want to do that? To protect the banking system? I’ve seen no evidence that crypto threatens the banking system.

Do we really want to make people who invest in crypto feel safer about their investments? Wouldn’t that make “bubbles” even more likely? Isn’t it healthy for crypto investors to fear they might lose their investment? Wouldn’t it make them more careful?

And what is the social value of crypto? Why should social policy encourage investment in that area?

Here I need to walk a fine line between crypto critics and fans, as I’m in neither camp. I don’t see where crypto has produced much value to society, and it’s a fairly costly industry (if only in energy consumption). So I don’t see any reason to encourage the growth of crypto through government policy. I don’t wish to protect crypto investors. At the same time, I see no reason to inhibit the growth of crypto. Just because it doesn’t seem very useful to me, doesn’t mean the industry is of no value. The whole point of free markets is for people to explore new ideas and profit from them if they prove to be useful. Why would we wish to inhibit a new and innovative industry that might pay great dividends in the future?

Again, there may be market failure arguments of which I am unaware. But “bankruptcy and fraud” are not textbook examples of market failure that require regulation. One is a part of any well functioning market, while the other is already illegal. It may seem obvious to you that “something must be done”, but it is not at all obvious to me.

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Michael Sandifer

Nov 12 2022 at 12:47pm

Yes, new regulation will likely cause more and bigger problems that it solves. We need far less financial regulation.

Phil H

Nov 12 2022 at 1:15pm

I think I agree with this, but I can see two potential reasons why regulation might be justified.

(1) The international nature of crypto. If crypto transactions are commonly being done in offshore jurisdictions where American rules on fraud aren’t being enforced, then onsure regulation may be necessary.

(2) If crypto is (as it seems to me) not much more than just a big ponzi scheme, then it may need specific regulation. Just as there are specific regulations to control pyramid schemes in the form of multi-level marketing, regulation for crypto might be necessary even though it’s just a subset of fraud, because it’s such an elaborate and well-disguised kind of fraud.

Scott Sumner

Nov 12 2022 at 2:10pm

The argument that crypto is a Ponzi scheme is similar to the argument that fiat money is a Ponzi scheme (the asset only has value because someone else will accept it in the future—no intrinsic value.)

Personally, I don’t find that argument to be particular persuasive for either currency or crypto. Both cash and crypto have value as transaction media and stores of value.

Jim Glass

Nov 13 2022 at 10:38pm

The argument that crypto is a Ponzi scheme is similar to the argument that fiat money is a Ponzi scheme … I don’t find that argument to be particular persuasive

Fiat money and crypto “currencies” like bitcoin and ethereum (really they are commodities, and regulated as such) are assets. Their value may go up or down but there is nothing “Ponzi” about them.

A Ponzi scheme offers an unsustainable rate of return (often without any investments even try to fund it) so it has to attract ever more new investors to pay off the old ones, which must come to a sorry end.

FTX is not a crypto currency, it is an exchange/bank, providing the services, ahem, of trading crypto and keeping customer trading accounts.

FTX was running a “Madoff” Ponzi scheme — pushing a commodity token it created to ever higher prices via unsustainable returns, denominated in crypto not fiat. (Though that was the least of its sins, I mean, compared to its CEO apparently effectively passing on $8 billion of customer account funds to his 28-year-old girlfriend’s hedge fund which lost them. All sins being relative.)

Anyhow, listen for yourself to Sam describing his Ponzi scheme six months ago (“16% return”) …
Crypto CEO Accidentally Describes Ponzi Scheme

Matthias

Nov 13 2022 at 7:25am

I’m not sure it’s a well disguised fraud, when half the population already tells you that it’s fraud?

You might want to regulate crypto further via already existing anti gambling and anti money laundering laws. Those laws probably allow the relevant agencies to spin up new rules and interpretations as they see fit.

Kevin Dick

Nov 12 2022 at 2:23pm

Actually, there are quite a few limitations on ordinary Americans being able to invest in bio tech startups.

This is, of course, not justified. But regulating crypto is actually par for the course in terms of US regulatory posture.

Nov 12 2022 at 2:49pm

Not once they’ve gone public, at which time they are still very risky.

Spencer

Nov 12 2022 at 2:30pm

Crypto is not legal tender.

artifex

Nov 12 2022 at 8:56pm

I don’t see where crypto has produced much value to society, and it’s a fairly costly industry (if only in energy consumption).

The most valuable applications will take a few more decades to develop but will prove to be well worth the relatively tiny costs involved.

BC

Nov 13 2022 at 5:13am

Interestingly, and perhaps tellingly, the people calling for crypto regulation seem to be mostly crypto critics/skeptics, i.e., people that probably don’t own any crypto themselves and, thus, are highly unlikely to be affected by crypto crashes. In fact, they seem to be more suspicious of crypto investors that make a lot of money rather than viewing those crypto investors as needing “protection” through regulation.

Myself, I am a crypto skeptic. I have found that not owning crypto has insulated me very well from the crypto crashes of the highly de-regulated environment. In contrast, the highly regulated traditional financial industry seems to cost me a lot in terms of bank bailouts, Fed-caused recessions and inflations, and the like.

Devin Lavelle

Nov 13 2022 at 9:29am

These are companies where you buy and sell very risky holdings, speculating that the value will increase. It seems, at the very least, they should be regulated at the level of Schwab, etc, right?

Nov 13 2022 at 11:40am

I think BC has it right. Why should I care about this issue? I don’t want my tax dollars regulating this industry–what’s in it for me? Investors ought to know that this stuff is super risky. Caveat Emptor. If there’s fraud, we already have laws against fraud.

Capt. J Parker

Nov 13 2022 at 4:11pm

I thought the main argument for financial regulation was that it was necessary to have a r

Nov 13 2022 at 4:30pm

I thought the main argument for financial regulation was that it facilitated a robust market for investments where capitol was allocated efficiently and the resulting economic growth benefited everyone. If that is so then there is a cost to everyone when a product avoids regulations and attracts more investment than it otherwise would if forced to abide by the regulations everyone else must.

Nov 14 2022 at 1:52pm

Where is the evidence that society would benefit if the crypto market were larger? So what if the riskiness discourages some people from investing in crypto–why is that bad?

Nov 14 2022 at 3:26pm

Society benefits from there being a robust market where savers can invest and transparent market prices are used to allocate capital across all types of investments. That’s the argument often made for regulation of the whole market of investments.

Unregulated crypto gets to hide risks and overpromise rewards that the regulated market participants can’t do. So, Crypto investments are incorrectly priced both in terms of risk and in terms of potential gain. This means that Crypto, being incorrectly priced, might have attracted more investment than it would have if regulated the same way as other types of investments.

Nov 14 2022 at 12:32am

I don’t want my tax dollars regulating this industry–what’s in it for me? Investors ought to know that this stuff is super risky. Caveat Emptor. If there’s fraud, we already have laws against fraud.

Police forces organized to prevent crime only arose mid-19th Century, e.g., circa 1850 in New York City. Of course crime existed before then. If you became a victim of a crime back in those days, then after you suffered the crime and its cost, your remedy was to track down the perp and bring your own prosecution.

As the first Municipal Police force was organized in NYC, I can imagine some well off people who lived in (relatively) low crime areas saying…

“I don’t want to pay for this policing. What’s in it for me? People ought to know life is risky. They should take care of themselves. And if a crime is committed, we already have laws against crime.”

robc

Nov 14 2022 at 3:59am

While thief-takers had notorious problems, are you SURE they were worse than cops?

Its hard to have laws against victimless crime when victims bring prosecutions.

Nov 14 2022 at 1:53pm

Fraud is already illegal. I think you missed my argument. I’m asking why certain legal things should be made illegal.

D

Nov 14 2022 at 4:09pm

I am not sure I disagree with the conclusion of the post, but regarding the reasoning, I think it conflates two forms of “regulation”:

Unconditionally forbidding things that were previously allowed,
Continuing to allow these things conditional on increased paper trail, auditing etc. requirements.

“Fraud is already illegal” is an argument against the applicability of 1., but not of 2. The point of 2. would be to make fraud harder to commit in practice.

Nov 14 2022 at 6:00pm

I’ll admit to finding the concept intriguing. Since I don’t see social value in crypto, maybe I should oppose regulation so that the whole thing crashes and burns more quickly?

I wasn’t envisioning regulations to generally make more things illegal, but the kind that provide transparency (either to the public, investors and/or regulators) and enforcement to make it more likely that we learn about (and maybe stop?) fraud (or other existing crimes) before the company melts down and its too late.

Ilverin

Nov 13 2022 at 11:42am

I think noncrypto investments are either public (significant disclosure regulations) or private (requires accredited investor status (not hard to get besides 1 million$ asset requirement) or employee exception). I think this does not apply to crypto and it seems like it would be better than the status quo (probably public company disclosures are too strenuous and there should be a middle category, perhaps called “semiprivate”, where the investor accreditation and disclosure standards are weaker)

Nov 14 2022 at 1:55pm

Can’t anyone legally invest in currencies from countries like Argentina, Turkey, Venezuela, etc?

Nov 14 2022 at 2:25pm

Yes, but the rate at which sovereign currencies fail is far lower than the rate at which crypto coins fail and no issuers (governments) are telling currency investors “the currency will appreciate in value”.

Proposed regulation of new type of security called “semiprivate” investment class: since nonaccredited investors are on average less able to skillfully evaluate growth plans, marketing materials for the coin should only describe current capabilities, valuation, and usage rate and how/whether new coins can be created. Such a regulation would have not required any change for Bitcoin, Dogecoin, or stablecoins, but Ethereum would have had to be initially funded by some means other than an initial coin offering to unaccredited investors.

Nov 13 2022 at 12:47pm

One perhaps reasonable, and illuminating, regulation would be for the Fed to require (traditional) banks to include crypto risk in their stress testing. What would happen to the big banks if bitcoin, ethereum, and every other crypto coin were to crash to zero overnight? My guess is pretty much close to nothing. If so, then that would also tell us that crypto is not systemically important.

Nov 14 2022 at 12:03am

I’m wondering if this is just a knee jerk reaction, or if there is some market failure that I missed.

First, what we are talking about, as there seems to be much confusion.
Crypto currencies like bitcoin and ethereum are already regulated, as the commodities they actually are, by the Commodities Futures Trading Commission. That’s been true for years, no problem there. It’s pro free market as commodities are freely traded.

The talk about regulating the “crypto space” regards entities like FTX — exchanges and “banks” and other strange entities which escape the rules that apply to all normal exchanges and banks. These then use crypto currencies to engineer bizarre and dubious products and practices that would be illegal for exchanges and banks — very often involving massive amounts of fraud and incompetence.

You know, like effectively taking $8 billion of customer deposits and account balances, and giving them to the hedge fund run by your 28-year-old girlfriend — who proudly dislikes math but is big on Harry Potter — who loses it all, amid the even larger process of … aw…

FTX Bankruptcy Explained.

“Look, I’m not making any of this up, and it’s only going to get worse.”

Listen and you’ll see how the likes of FTX escape all the rules that apply to all other exchanges, banks, dealers, etc., enabling them to have fun like this.

A few comments: … 3. Fraud is already illegal.

OK, if after the $32 billion is gone, declaring “Hey, somebody committed a crime!” is the satisfactory outcome, then who needs more regulation than that?

And in that case, our banks and brokers and broker-dealers are massively over-regulated now. We should repeal all the regulations that cover them down to the level of what applies in crypto space — so Chase and Schwab and Fidelity are deregulated-free to run Ponzi schemes, and don’t have to bother to keep funds to cover customer deposits-redemptions, and their big execs can have really grateful girlfriends.

After all, what do the existing rules for banks and exchanges and brokers do? Protect investors? Make people feel safe about investing in markets? Why would we want to do that?

Well … maybe because if the heavy hand of the state appeared at the FTX office periodically in the form of a bank examiner, like in It’s a Wonderful Life, to ask “Sam, you got the money to cover customer withdrawals?” he’d never have had to answer “No, I gave it to my girlfriend to play with”. And a $32 billion bank run would have been avoided, and $32 billion of damage to human lives wouldn’t have happened, and the crypto markets wouldn’t have been torpedoed but could have developed healthily. And the world would be a better place.

Albeit at the cost of that great loss of liberty.

Sebastian H

Nov 14 2022 at 1:59pm

Is the $32 billion really gone? Or was it grossly overvalued to begin with. From the description of the ‘business’ it seems like significantly less than $32 billion in actual assets or anything tied to the physical economy at all is gone.

For reference if $32 billion vanished from the normal banking industry there would be pretty big real world effects. This appears to be touching almost nothing in the real world economy.

Nov 14 2022 at 2:02pm

I don’t think there is any empirical evidence that the SEC has made investing safer; the studies I looked at back in the 1970s found exactly the opposite. BTW, the SEC was warned about Madoff, and did nothing, How does that protect investors?

Everyone investing in crypto knows that it’s super risky. When assets go from 10 cents to $68,000, there is obviously some risk that they might fall sharply. There were many news articles pointing out that FTX was making very risky bets. Sometimes you win, and sometimes you lose. I don’t want investors thinking they can’t lose.

Lots of people made a fortune in crypto; why all this handwringing that some are now losing money?

Jon Leonard

Nov 14 2022 at 12:22am

The best argument from my perspective is that cryptocurrencies are money-like, and private issuance of money-like securities has some bad failure modes. I’m thinking of cases like the Mississippi company’s history in France, or the wildcat banking and the Specie Circular in the US. Of course, government issuance of money isn’t free of that sort of problem either, and the regulations that are likely to follow aren’t the ones we need. This is additionally complicated by cryptocurrencies seeming to attract excessively speculative or criminal behavior.

Nov 14 2022 at 2:07pm

I don’t think crypto is very money-like; it’s more like electronic gold. We don’t regulate gold, despite it being very risky.

Nov 15 2022 at 3:41pm

I’m used to defining money as “A unit of account, a store of value, and a medium of exchange”. Some of the cryptocurrency assets are closer to this than others (stablecoins being closest, I guess), and things like NFTs being fairly far from it. My view is that it is close enough that we see the sorts of speculation you might see in foreign exchange markets. As you point out, that’s not necessarily all that different from what you might see with a commodity. The comparison to gold’s unregulated status is an interesting one. The US government has definitely regulated gold in the past (Executive order 6102, for example), and it was only after the US left the gold standard that we got rid of the last of the regulation. In practice most cryptocurrency activity is probably better covered by existing rules against fraud, or theft, or running Ponzi schemes, but if a cryptocurrency gained significant use as a payment mechanism, it would probably need regulation to avoid swings in the size of the money supply.

Nov 14 2022 at 10:48pm

The best argument from my perspective is that cryptocurrencies are money-like, and private issuance of money-like securities has some bad failure modes…

Again, this isn’t the issue. Nobody is talking about additionally regulating crypto currencies. They are commodities — they exist in fixed finite amounts at any point in time, and like all such items can rapidly swing in value in response to changes in demand.

And the Commodity Futures Trading Commission already deems crypto currencies to be commodities — which is free-market good, because commodities are freely tradable. The only alternative would be to treat them as securities, which would make them highly regulated.

The issue is regulating the mass of stunningly corrupt and incompetent exchanges that take people’s money for crypto, and the flood of fraudulent and ineptly unsound products they financially engineer to sell en mass to the fans of Tom Brady.

BTCholdet

Nov 14 2022 at 1:50pm

Some of those in power may consider bitcoin (‘crypto’ is derivative of bitcoin and generally a cesspool) to be a threat to the power of the state. Regulatory capture would be a very logical attempted threat mitigation.

Alan Goldhammer

I agree with Scott but unfortunately not the examples that he posts. Some aspects of biotech and junk bonds are regulated by the SEC. Certainly if the company is public they have reporting obligations and investors can review filings to see if a particular stock or bond investment is worth it. Private placements are a different issue as these are unregulated. I can loan Scott a lot of money to start a NGDP business (could not resist) but as long as it remains private there are no reporting requirements.

One of those calling for Crypto regulation was Bankman-Fried who testified to Congress on this topic whereas the big player in this arena Zhou did not want any regulation. As long as the business case for Crypto remains abstract, there is no need for regulation of any kind. Caveat Emptor!! It’s not different than buying art, diamonds, gold, etc. None of those investments are regulated. Why should Crypto be any different.

Investors risk capital every day and know (or should know) what type of risk premium is warranted. Even then there are bound to be aberrations such as the meme stock playground in 2021 which made some very wealthy but cost many others dearly, including well capitalized hedge funds that could not see the forest amidst the trees. The government did not bail any of the groups/individuals out for making bad decisions.

One can argue that bank regulation is in the nations interest along with deposit insurance. I’m not going to argue the latter point as Anat Admati has already done an admirable job of this.

No Crypto regulation for me; and of course no Crypto investments either. As Warren Buffett pointed out in his letter to investors 7-8 years ago, why buy gold when you can buy Exxon?

Nov 14 2022 at 2:05pm

My point was not that biotech is not regulated by the SEC, rather that the fact of a biotech stock going to zero and not repaying loans isn’t (by itself) evidence of something being wrong with the market.

Nov 14 2022 at 2:50pm

No argument for me on this point as over 95% of all biotech companies failed.

Nov 14 2022 at 10:09pm

My point was … the fact of a biotech stock going to zero and not repaying loans isn’t (by itself) evidence of something being wrong with the market.

Of course it’s not.

But what about, say, 300 biotech firms … I won’t even say ‘going bust’, because 143 of them simply vanished without a trace, “without any explanation” such as …

Due to the maintenance of CoinBene global server, there is a problem of (being) unable to log in (to) the http://www.coinbene.com page. We are very sorry about this.

Poof! Everything gone! Assets and all to, well, who knows where? 143 times!!!

While another 30 or so left enough of a trace to know they were organized as “outright scams”. And of the total ~300 goners, only about 60 (22%) failed due to “legitimate business reasons”.

Would that suggest something wrong in the market?

Perhaps due to a systematic failure in corporate governance? (Such as a total 100% lack of it?)

Vivian Darkbloom

Nov 15 2022 at 11:36am

Where did the idea come from that “biotech is not regulated by the SEC”? Ok, the main text says “biotech startups”, but still!

Offering securities to the public by start-ups (bio-tech or otherwise) *is* regulated by the SEC, even if some offerings are not required to formally “registered” (a technical term) with the SEC where “registration” imposes yet more stringent requirements. Issuers must comply with a plethora SEC regulations. First, while certain offerings may be considered “exempt from registration”, those same rules that define such exemptions are SEC regulations. These regulations define the scope of exemptions, the size of the offering, the types of investors (“accredited” and “non-accredited”) and the type of financial information that needs to be provided to those categories of investors.

For a brief intro to the hurdles these bio-tech startups must overcome before offering “exempt” securities to the US public, see the following CFR:

https://www.ecfr.gov/current/title-17/chapter-II/part-230#230.506

Of course, “it’s legal to invest”, but the more relevant issues are is “is it legal to offer” and, “under what conditions”.

Fuyuki Fujiwara

Nov 14 2022 at 2:47pm

It remains to be seen what regulations get proposed, but this knee-jerk resistance to regulation is misguided.

Risky investments, like investing in bio-tech start-ups, in the US are legal but not open to all investors. The SEC’s accredited investor scheme allows “sophisticated” investors meeting wealth or income criteria to invest in unregistered securities. Limiting access to risky, unregulated investments is not unreasonable.
In the FTX case, the issue is not that investors in cryptocurrencies lost money because the value of their investments fell. Rather, the issue is that FTX, who was holding customer assets and acting as a fiduciary, lent those assets to Alameda, its affiliate, who ultimately was unable to repay FTX. Commingling funds is a big regulatory no-no but FTX’s offshore entity was not regulated in the US.

Regulation of crypto would not “encourage” risky investments but simply enhance transparency, trust and fairness in a young area of finance, based on well-earned years of financial history and experience. The mistakes and misdeeds in crypto re-tread the steps of financial history and the industry should be open to commonsense rules and regulation.

steve

Nov 14 2022 at 4:29pm

As much as I want to agree with you I am having A hard time seeing how regulations just requiring transparency would be bad. Maybe a few more people invest because they think, incorrectly, it is safe but I think it makes it more likely the fraud behaviors get caught when you have more people looking at the numbers. Whatever we do, lets not bail them out. If we do lets do it with dogecoin.

Steve

Rico

Nov 14 2022 at 4:31pm

Totally agree-keep the government hands out of the way because all the government does is put its hands out in order to then turn around to give handouts to the winners they choose over the losers they decided they don’t like.

I put about 10% of my retirement in BTC when it hit a recent deep low of $19K. If I lose it all? Well tough luck for me. That’s on me and my research and my personal non-aversion to most risk in life.

homeandhosed

Nov 14 2022 at 4:46pm

Does anyone have a rational argument for why the Tether peg is holding? The asymmetry in the evaluation of hold/redeem (max value = USD$1, expected value $1 – p(collapse in peg), min value =$0). Regardless of the quality of the net asset backing, this is the classic preconditions for a bank run. Any insights/thoughts?

Brian Moore

Nov 14 2022 at 7:36pm

“It may seem obvious to you that “something must be done”” – it is obvious! An event with bad effects has occurred that can plausibly be turned into an argument for increasing our power, so obviously that is the thing that must be done.

Whether the things we will do with that power actually reduce the likelihood of those kind of events is irrelevant.

JimB

Nov 14 2022 at 8:03pm

Biotech is risky but it has a real chance of being genuinely productive. Crypto doesn’t have a great – any? – productive record unless you count dealing in weapons, drugs, etc, or tax-evasion and internet extortion. To me, that’s a significant problem with the analogy.

Michael

Nov 14 2022 at 8:20pm

I’m on the “regulations needed” (or at least “vigorously enforce regulations currently on the books, needed”) side. All the examples cited above—biotech, gold, diamonds, etc.– are subject to an existing legal framework. And so is Crypto and its exchanges, but legislators and regulators have taken an overly relaxed approach so far. The urgency is the scale of the risk presented to investors, and the move by supposedly prudent actors in the financial world — pension funds, endowments, retail brokers — to risk their client’s funds in Crypto as banks and VCs try to cash in on the Crypto boom by normalizing it.

Two further thoughts:

Private placements are not “unregulated” and do not have “no reporting requirements.” Startups selling equity or debt are subject to a raft of State & Federal corporate, securities, tax laws and accounting standards. Public filings may be required, if only to claim an exemption from regulation.

A private company’s foundation documents–Articles, Bylaws, initial shareholders and directors, are all public. It’s public disclosure obligations are limited, but the disclosures, oversight and contractual controls over a private company by their investors–lengthy reps and warranties; quarterly and annual audited financials; operating covenants on use of funds; limits on borrowings; the ability to access corporate bank accounts, etc. are usually extensive and embedded in the company’s Articles, Bylaws and Share Purchase and Investor Rights Agreements. These straitjackets are part of the reason why private companies go public.

The purpose of disclosure, say for a biotech going public, isn’t that it makes it “safe;” it’s that it at least gives investors an idea of the risks in investing in that company are. Crypto’s largely a black box.

Buckland

Nov 14 2022 at 9:13pm

Unfortunately there is a case for regulation. For the regulators.

Companies in highly regulated industries give more to politicians. They’re more likely to agree with the party in power in the area of various spending and tax cut ideas.

biotechinvestor

Nov 15 2022 at 1:05am

Hi, perhaps I’m not quite sure what you mean by “regulation” of crypto–certainly, it might make sense to have a supervisory authority that can ensure certain activities (aka not lending out client money) are consistent with existing regulations.

One point I would add is that biotech is in many ways highly regulated. While an investor can buy or sell any security, all biotech companies conducting trials in the US are under very strict FDA guidance. For example, an application to start human testing (aka IND) must include GLP tox packages, and subsequent applications to move to Phase 2/Phase 3 require extensive discussion with the FDA (many a young biotech has been tripped up with manufacturing deficiencies and Form 483’s). Furthermore, biotech companies must persuade investigators and their institutions to recruit patients, which might constitute another form of “regulation” (albeit, in a less formal way).

I would be surprised if anyone were advocating some regulation of what bitcoin an individual could buy; but, like biotech, it would be nice to supervise/audit companies so that they comply with the law (consistent with almost every industry).

Tom DeMeo

Nov 15 2022 at 8:57am

A better case can be made that much of it should just be illegal.

“Fraud is already illegal.” – that is fine in a world where fraud cannot scale indefinitely, but terrifying in a world where there is almost no limit to the total financial risk an individual or small group can take.

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