20th December 2022 > > The U.S.

tl;dr

Wild talk about “banning” cryptos makes no sense on any level.

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No evidence of the usual Santa Claus rally. The all-pervasive doom and gloom baked into risk asset forecasts for 2023 is starting to tickle the fancy of contrarians worldwide.

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Curious Cryptos’ Commentary — The U.S.

Sherrod Brown is both a Senator and Chairman of the Senate Banking Committee. In this role he has legitimate concerns about cryptos and how they relate to the legacy financial system, and whether events like the fraudulent collapse of FTX pose any threats to the stability of the US banking system.

He has been interviewed by NBC, during which he made some valid points, but also talked a good deal of nonsense, in my opinion.

He was spot-on with his observation that the use of political donations (I read that $5.1mm was given to Joe Biden to support his successful bid to become President) created an impression of credibility around FTX and its criminal CEO and founder, Sam Bankman-Fried.

Bankman-Fried made much noise around his donations to the Democrats though it seems that he also contributed to Republican coffers whilst keeping quiet about the latter. Some of those donations are being returned to bolster the pay-out for stranded investors who left deposits on FTX. Personally, I think every cent of every political donation should be returned no matter who received it, but that seems an unlikely outcome.

FTX is not the first, nor will it be the last, company to try to curry political favour in this way.

Brown argues – correctly – that legislation and regulation are required, but his justification is without basis:

“I’ve spent much of the last year and a half in this job… trying to educate the public about crypto and the dangers that it presents to our security as a nation …”.

Oh dear, you can see where he is going with this.

Jumping on the old trope bandwagon, Brown is a very partial observer of the crypto revolution:

“… the threat to national security from Korean cyber criminals to drug trafficking and human trafficking and financing of terrorism and all the things that can come out of crypto.”

It’s almost as if he believes that North Korean criminal gangs, human trafficking, and terrorism were absent from the world before cryptos were invented.

Crypto enthusiasts like us make a reasoned argument in favour of cryptos, reflecting the positive potential for this very latest technological revolution, whilst also accepting that there are of course downsides to all advances made by humankind.

Crypto naysayers can only talk about the potential for harm when they should in fact work harder at coming to a balanced point of view. Without looking at both sides, their poisoned view should ideally exclude them from the conversation.

…

In an earlier open letter, Brown did take a more reasoned approach. You can read that letter here (https://www.brown.senate.gov/newsroom/press/release/sherrod-brown-to-treasury-we-need-to-work-together-on-crypto-legislation) but a key statement is this:

“… including the development of legislation that would create authorities for regulators to have visibility into, and otherwise supervise, the activities of the affiliates and subsidiaries of crypto asset entities.”

Unfortunately, he rowed back on this during the interview by stating that crypto “ought to be banned”. Such careless talk will simply drive crypto businesses elsewhere. FTX was domiciled in the Bahamas. Its management practices would not have been tolerated if the exchange and its sister hedge fund Alameda Research had been based in the U.S.

And this is the exact point that Brian Armstrong, CEO of publicly listed cryptocurrency exchange Coinbase, made on Twitter when he responded to crypto sceptic Senator Elizabeth Warren:

Warren:

“The collapse of one of the largest crypto platforms shows how much of the industry appears to be smoke and mirrors. We need more aggressive enforcement and I'm going to keep pushing @SECGov to enforce the law to protect consumers and financial stability.”

Brian:

“FTX.com was an offshore exchange not regulated by the SEC. The problem is that the SEC failed to create regulatory clarity here in the US, so many American investors (and 95% of trading activity) went offshore. Punishing US companies for this makes no sense.”