Seeing cryptocurrencies grow so much over the last few years, it seems to me that without governance over cryptocurrency transactions, cryptocurrencies tend to incentivize scams and black market trading, and they tend to function as speculation/gambling schemes. "Shilling" is common among everyone I know that has purchased cryptocurrencies, and many of them have been ruining friendships over it.
I used to be more optimistic, but I can't help but see cryptocurrencies as a strong negative on society now.
It's pretty wild cryptocurrencies are still legal in many parts of the world.
It was Charles Stross, I believe, who once described Bitcoin as an enormous social experiment educating hackers on the historical needs for financial regulation.
Sure, but let's not pretend like bank regulations are perfect.
Micro: Right this second, one of my checking accounts at a "reputable" institution (efirstbank.com) is blocked from ACH transfers until April due to hitting an inactivity threshold they refuse to elaborate on. The only way I can move money out is by paying $50 per wire.
Macro: the BTC coinbase says it all: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
> Micro: Right this second, one of my checking accounts at a "reputable" institution (efirstbank.com) is blocked from ACH transfers until April due to hitting an inactivity threshold they refuse to elaborate on. The only way I can move money out is by paying $50 per wire.
You have some recourse with regulators when dealing with fiat banking systems. You have zero recourse when dealing with crypto losses (unless you’ve lost enough that a criminal prosecutor makes it their problem and you can convince them it’s worth their time).
Very good point. Democracy can govern banks. Democracy cannot govern cryptocurrencies. That is both why it is hated and loved by different groups of people.
"Banks get bailed out" seems to be a feature for stability of systems (counterargument: "Let all the banks fail" would have been helpful for what part of society?)
There is of course the very legitimate argument of bailing out homeowners (banks still get their money and people get to actually be in houses), but letting the pieces fall where they may is extreme orthodoxy when the real world is at stake. And of course the crypto ecosystem has shown this pragmatism so many times now when basically forking off to other things to reverse unwanted transactions.
Didn't say we should privatize the gains. I just don't think that it's useful to tear down a bunch of infrastructure on principle. I would not have minded just nationalizing as much as would have been needed either. And of course bailing out a bunch of homeowners would be extremely ideal.
Gov't intervention when systems are falling apart are not a bad thing (well, at least when they actually do helpful things).
Most of the commentary about the 2008 bank bailouts presumes all the money was spent or given to banks. Banks paid everything back. A couple billion dollars in opportunity cost because of inflation is definitely worth preventing a collapse of the financial system.
Yes, but you insisted that the loans were profitable, not that they had "a couple billion dollars in opportunity cost". There is a difference between profit and loss.
You’re describing as profitable lending by an entity funding itself by issuing Treasuries and then ignoring the cost of the interest paid on those Treasuries when deciding if the use of the money was profitable.
Inflation is not a direct cost of interest. If we are going to included opportunity costs in the definition of profit and loss, then we should include the opportunity cost of tax revenue plummeting if the financial system collapsed.
It’s not inflation. It’s literal money paid out via the government paying interest on its debt obligations (which were higher as a result of the bailout money than they otherwise would have been).
I agree that they should have done what they did. I do not agree that it was net profitable.
"Guys, we would actually have been richer instead of poorer if six years worth of inflation hadn't happened! Let's celebrate!"
If I can buy n units of goods and services for the money before the investment and n-1 units of goods and services after the investment, I've lost. I don't see how the particular numbers you print on currency enter the equation. How is nominal profit at all interesting?
The ACH thing sounds annoying, but your money is not at risk.
I think the more concerning thing I have seen is banks deciding that they no longer want to do business with you with no appeals process or recourse as to why your account was flagged.
Bitcoin does not replace banks. People and business still need loans, they still want to invest money and have money invested with them. Crypto doesn't solve that problem.
The 2008 collapse had nothing to do with ACH or any of the aspects which crypto has a plausible case for improving.
My understanding is that (one of) the point(s) of Bitcoin was to de-centralise the control of the currency so that "banks getting a bailout" isn't possible since the currency control of Bitcoin doesn't allow printing it out of thin air for handing out to the businesses that caused the crash that seemingly necessitated the bailout.
Secondly to that, I find it amusing that the cause of the GFC (amongst numerous other large-scale issues) is both poor regulation and ineffective enforcement of an industry that's over a century old. Proving, basically, that the regulation of cryptocurrency is a pure talk-fest (or that any US regulation is a pure talk-fest). It will result in the honest folks doing the right thing and getting screwed in the process whilst the dishonest still do the bad things because the US' will to enforce regulation is weak.
A few years later, the TheDAO hack happens, and Vitalik and friends pretty much force a fork on the network by spamming FUD and threatening to stop the entire thing because they're losing too much money and they're too big to fail.
Totally different from banks: it's no longer the government deciding to bail them out, it's straight up the bank printing the currency telling people to bail them out or their currency becomes worthless.
I wasn't paying a lot of attention back then, but from what I've read about it, it was far from the worst decision in the world despite the fact it went against the most basic ideology.
I give it a bit of a free pass because it was a new thing built on top of a new thing, so somewhat of a beta test, which failed, so roll back to a working state.
Not sure what would happen now, although there are regular hacks that no longer see rollbacks.
Also, Ethereum Classic still exists, so that path is still available to those who want to follow it.
" so that "banks getting a bailout" isn't possible since the currency control of Bitcoin doesn't allow printing it out of thin air for"
?
What part of 'the economy would crash and burn' do people not understand?
The banks would have gone down like dominoes and taken the entire system with it. This isn't 'fear mongering' it's basically just math, you can see how the system is connected and what will happen.
That's what happens when systems are tightly intertwined. We could entirely firewall them, but then they wouldn't be remotely as efficient.
The fallacy of 'Hard Currency' is that people think we can avoid these problems with some extant construct, like 'Gold' or 'Digital Proof' but that doesn't solve the problem at all.
Economies are integrated systems that have to be regulated as best we can there is just no way around it.
'Hard Currency' is an 'instinct' that develops into an ideology that just doesn't hold up.
Far from 'weakly enforced regulations' most Western nations have very well and strongly enforced regulatory regimes. There are rules upon rules about what is allowed and what is not.
Securities Regulation are maybe a bit iffy, particularly insider trading, but that's only one thing.
The only way to avoid the problems we saw in 2008 would be to have more effective regulation of the parts of that system that failed, crypto won't save us there.
Finally, the banks were bailed out mostly with loans which they paid back, not free money. If there was a big funny business bailout, it was the mortgages that the Fed accepted as collateral at face value, which was more or less a bailout of homeowners, related to the fact the issue was with homes, not so much currency.
> The banks would have gone down like dominoes and taken the entire system with it. This isn't 'fear mongering' it's basically just math, you can see how the system is connected and what will happen.
And the fact that the Fed could just QE a bailout is why there's no will to properly regulate or enforce.
It's a double edged sword.
I would have liked to see what would happen in a pandemic if Bitcoin were the world's reserve currency; if no QE were possible to help the suddenly unemployed etc. If / when Bitcoin fails in such a situation, we could see an increase in trust for fiat currencies and government monetary policy. It's a purely hypothetical situation though.
"I would have liked to see what would happen in a pandemic if Bitcoin were the world's reserve currency;"
We already know the answer to it: the economy would collapse in a hulking mass.
The 'advantage' of Bitcoin, which is 'integrity' (i.e. can't be debauched) becomes a big 'disadvantage' during a time of crisis, when reallocation has to happen.
It's like nailing your boat with a plank to the dock: string and reliable. But then the tide goes out and everything breaks: better in the long run to use ropes.
BTC is inflationary, people would rush to it during a crises and credit would evaporate, the dominos would all fall down.
Something 'unforeseen' will always happen, meaning we have to be able to change the rules sometimes.
Much like a pandemic situation, a lot of the normal rules for operating the economy go out the window. Vaccine production and distribution is fully socialised, not part of normal healthcare etc..
And yes, it's a giant double edged sword which is why there's no excuse for not having 'intelligent, comptetent and responsible leadership' at all times.
> Far from 'weakly enforced regulations' most Western nations have very well and strongly enforced regulatory regimes. There are rules upon rules about what is allowed and what is not.
They are as regulated as the system will allow. That is, companies dump lots of money into Congress to increase the chances of existing regulations being weakened and new ones neutered, and it works (see: Dodd-Frank [0]). And sadly, I don't see things changing anytime soon, as the American political landscape is basically divided into those who talk big on progress (but who, upon gaining control of Congress and the presidency, just barely uphold the status quo) and those who want to deregulate things even further.
> The fallacy of 'Hard Currency' is that people think we can avoid these problems with some extant construct, like 'Gold' or 'Digital Proof' but that doesn't solve the problem at all.
This is accurate. While cryptocurrencies might not allow for spending more than you have in your wallet, there are many ways you can trade on margin and "stable"coins which only have a fraction of their issued volume backed by any assets [1][2][3], including propping up an exchange with stablecoin funds [4]. I would not be surprised if someday there was a "bank run" on these unsecured stablecoins which caused huge knock-on effects.
I think that the fundamental problem is greed combined with people who might not be very greedy but who are desperate to improve their financial situation. And unlike traditional financial institutions, crypto is quite difficult to regulate or provide any consumer protections for.
> Right this second, one of my checking accounts at a "reputable" institution (efirstbank.com) is blocked from ACH transfers until April due to hitting an inactivity threshold they refuse to elaborate on. The only way I can move money out is by paying $50 per wire.
You can't... write a check? It's right there in the name.
My GF attempted to transfer money to a CEX that was verified and her money was frozen abritartly for 3months by her "bank" until they "investigated it thouroughly".
Banks are nice until they arnt. Crypto is a wild west but its the future of investments. The older traders will die out, those who had the money and the advantage will be replaced like the older bootleggers turned into multi-nationals.
Except that "financial regulation" doesn't seem to really stop much of anything in the traditional finance sector. How quickly we forget 2008 and the litany of other failures.
The 2007-8 crisis wasn't about the illicit movement of money. In fact financial regulation is what allowed us to detect and mitigate the business practices that lead to the crisis. The response was the massive QE that everyone feared would lead to terrible consequences yet instead it spurred a soft landing to what could have been 100x worse. There were no bread lines, no mass displacement, no political turmoil. You can't stop people from losing money on bad investments but you can prevent it from pulling the rest of the world down and that's what happened. That crisis should have everyone on their knees in awe at the Altar of Fiat Currency.
Nah, but nice job whitewashing QE as anything but a massive upward wealth redistribution.
Instead, the bad CDOs and CDSs could have just been unwound one by one with investment banks eating the losses and a lot of rich people becoming poor. Sure some _actual_ banks might have needed a holiday or two but instead we got TARP and QE.
What I meant is: The crypto space lacking regulation doesn't imply a claim that other currency systems don't also lack regulation in some form, nor that regulation is necessarily effective in either case. Stross didn't say regulation is perfect, he said it arose for a reason.
Stross' original statement is about regulation of traditional systems having historic drivers the crypto community had yet to re-discover, in his opinion, either in terms of broad awareness or appreciation. Challenging that would be fine (and interesting); saying "so what if it's bad? this other thing is also bad", though ...
FWIW, I think he's both right and wrong. I think there was a subset of the crypto community (and it likely strongly correlates with the productive one) aware of and actively rejecting a lot of history, but also a larger majority swept up in the hype without awareness of that information.
Agree. Very hard for regulators (=protect the consumer) to keep up with it. I compare that to the massive fires we have in California, so big that only the rain coming in November saves the bacon.
Not having a central single governance is the whole point of the exercise, it's a trustless system driven by mathematical rules and decentralized consensus. You can't stop a transaction, you can't kick anyone out (good or bad), the rules can only be changed by decentralized consensus and certain rules are pretty much guaranteed to not change (for example, any Bitcoin chain that has more than 21M Bitcoin issued wouldn't be called BTC, it would be treated like a fork, etc).
> It's pretty wild cryptocurrencies are still legal in many parts of the world.
I think there's a few reasons for that, one is, it actually makes money (ex: Coinbase generating billions, tax money generated from all the capital gains, electricity paid for by miners, etc), capitalist systems won't ban money making machines. It's also impossible to ban, you can ban on/off-ramps, you can't ban Bitcoin from running and transacting, by banning on/off-ramps, you'd lose any visibility into what's actually happening on the pseudonymous network. And last but not least, if this ends up being the next big thing, nobody would want to be left behind, so there's some game theory mechanics as well.
I used to be more optimistic, but I can't help but see cryptocurrencies as a strong negative on society now.
It's pretty wild cryptocurrencies are still legal in many parts of the world.