“Despite growing out of the 2008 financial crisis, Bitcoin has led to the creation of a faster, leaner and crueler crisis of its own, an unregulated hellscape where the elites have found yet another way to get rich off of the backs of regular people’s money. Whatever “noble” goals Bitcoin and cryptocurrency allegedly has or had are irrelevant – cryptocurrency does not generate freedom, it does not democratize finance, it does not create wealth for the majority of people that interact with it, and it has – this is not a “might” – led to billions of dollars of regular people’s money getting burned so that wealthy people can extract liquidity from them.

I do not care if you think this is “like the early days of the internet” or that crypto “might” do something cool someday – this is not a quirky startup with a niche audience, but unregulated and lethal financial software that functions only to take money from retail investors and send it upwards. Every time the media has humored these concepts as cute, or early, or acted as if the scams are “rare” and the majority of the industry operates in good faith, they have been complicit in creating meaningful financial harm to millions of people.” 

-Ed Zitron, “The Consequences of Silence.” ez.substack.com. July 25, 2022

I find this piece interesting for a whole host of reasons. But, I think the thing I find most interesting is this idea that regulation is, primarily, serving the interests of regular people.

To start from a personal example, my father-in-law, in his last few years of life, developed autoimmune encephalopathy. So, I had to review his finances. A disproportionate portion of his finances were in annuities making less than 1% interest that had been sold to him by a major financial institution. The annuity products locked up his money for some period of years, so it took time to get it out and put it into something that might cover the cost of inflation, such as an index fund.

But, even an index fund is a bit of a scam, isn’t it? Isn’t the whole point of index funds to tap “regular people’s money” and put it into a stock market? Isn’t that the goal of 401(k)s or even the idea of “private accounts” for Social Security that was floated during the George W. Bush presidency?

Yesterday, I received yet another “extended warranty” offer in the mail for a vehicle. Scam calls are a daily occurrence. There are ads on every medium asking for money for every conceivable purpose. Switch your electricity provider. Buy a goat for a family in Africa. And so on.

The question that occurs to me is whether cryptocurrencies are worse in some special way than the larger environment of scams we are all subjected to daily. Are cryptocurrencies worse than say, pay day loans? Or the gigantic markup charged by hospital systems for medical care? Are they worse than a system that advocates for taking on significant college education debt as the path toward middle-class respectability?

I don’t mean to create a false equivalency. Cryptocurrency is full of scams. I’d even say a large part of the cryptocurrency is just get rich schemes cloaked in innovation. But, that said, there are obvious applications where cryptocurrencies are better than the alternatives. You don’t have to think too hard about examples.

For one, there will invariably by a Digital Dollar. The United States government needs to create one in order to fill the demand for a global reserve currency for cross-border payments. If they don’t do it, then something else will fill that role, and it will be some other, probably a “basket”, of currencies. That’s a fact.

It’s also a fact that remittance payments, where someone is part of a diaspora sending money back to their country of origin, is an obvious place for disruption. Moneygram, Western Union and other services of that sort charge a significant amount for their service, which could be dramatically improved with cryptocurrencies.

This is even true for standard bank transactions. It takes anywhere from between 5-8 days for an ACH transaction, where one bank is making a payment to another on your behalf. With a cryptocurrency, it could be done in seconds.

Of course, there are other areas ripe for disruption, from rights on property (real estate, intellectual and others) to new forms of organization, such as decentralized autonomous organizations that can leverage the resources, skills and so forth from people around the world to accomplish some action based on some shared interest. Ordinary people being able to pool resources to positively impact the world around them is something new, and it is something enabled by cryptocurrencies.

Which leaves me to wonder what is really going on. Is it really just about wanting to regulate the “hellscape”, even though there is every indication that regulation only helps the status quo continue, which presents its own set of problems? Personally, I wouldn’t mind seeing the government step in for “regular people” and do something about some of the problems indicated above. Yet, somehow government is going to regulate cryptocurrencies when they are doing such a poor job with everything else? Color me skeptical.