The JC’s crypto-dyscomium™
Dumpster fire. Ongoing.
The character of the FTX collapse illustrates this well. All familiar, predictable, “trad economy” incompetence. Before worrying about US regulatory overreach, first deal with basic structural banking issues: term mismatch, credit risk, leverage, fraud. This is 101 stuff.
Crypto maximalists are staying strong: see this discussion between the babbling, gibbering wreck that we now know as Chance the Gardener and the more articulate crypto libertarian Erik Vorhees.
The crypto-libertarian take: crypto promises to fix the technocratic problem of regulation by substituting it with code. Code is law. But the problem of regulation is not technocratic but human. Libertarians, of all people, should understand regulations not as abstract technical artefacts that create bad incentives — though, sure, they do this — but as a by-product of hard-wired human, self-interested behaviour. Regulations make and get made by inevitable, self-interested human behaviour: acquiring social influence (and therefore political power); establishing market dominance and then extracting rent. The behaviour is reflexive, and there are feedback loops here. The regulatory ecosystem is as organic a market and complex a system as the market itself. It is part of the market.
Crypto does not — cannot — stop or fix hard-wired human behaviour. This is the the JC’s main objection to crypto maximalism: it is so glib. God knows the current state of trad-fi isn’t optimal, but it got that way because these are hard, deep, ancient, shape-shifting problems of human social organisation. They cannot just magically solved by code.