As I indicated in my review of Ben McKenzie’s book on cryptocurrency, my interest and knowledge of this subject is limited. Given this, here are some additional comments.
One place to get an analytical, though dated, view of
cryptocurrencies is Gary
Gensler’s 2018 MIT course on the subject. It is free, but you do have to
spend the time to watch it and do the readings. (I have not done this.) The
crypto enthusiasts were initially pleased by Gary Gensler being appointed to
head the SEC, but the crypto press is now harshly critical of him because of SEC
enforcement actions.
From what I gather, Gensler now thinks most cryptocurrencies
are securities except for bitcoin. He does seem though impressed with
blockchain technology, which could be used for other purposes than transferring
crypto. However, that is uncertain.
The regulatory dilemma with crypto is that setting up a
formal regulatory regime provides legitimacy for crypto. To me, trading in bitcoin
and similar “coins” looks like gambling with no benefit for society. In effect
you are betting that someone in the future will be willing to pay you more than
you paid for your cryptocurrency. In the meantime, it is up to the courts to
decide what role the SEC and the CFTC can play in this space. Congress can of
course decide to pass legislation on the subject, but that will probably take some
time.
Some people putting actual money into crypto may be betting
that crypto will become like dollars and euros and become embedded in our
financial system, but it is hard to see that happening. It does not inspire
trust; it does not have a central bank and a banking system to create it; and
it is not embedded in the economy and the legal system as money. Perhaps, bitcoin
can be a little like gold as a place to park money and, if there continues to
be enough people who believe in it, maintain some fluctuating value, but that
is uncertain. That could happen, though, with a few cryptocurrencies playing a
small role in financial markets.
Finally, some major players are getting into the crypto
game. For example, Fidelity Investments offers a trading platform for bitcoin
and ethereum. I think this is a mistake, but, to its credit, Fidelity says that
accounts in its crypto affiliate do not have the regulatory protections that
its normal brokerage accounts benefit from. Other firms, such as Blackrock,
want to offer ETFs in crypto. The SEC has not yet approved this, but it may.
Thanks for this post. Although one might say that current currencies and financial vehicles are little more than IOUs with no asset backing, crypto just seems like another example of our society's continued distancing from a solid sense of value.
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