The supervisory authorities cannot close the eyes of crypto crowds

The author is an FT editor and writes the chartbook newsletter

In a now notorious TV commercial for the trading platform Crypto.com, the Hollywood star Matt Damon intoned the following lines: "The story is filled with almost. With those who almost dared, who almost dared, but in the end it was too much for them. Then there are others. Those who take on the moment and commit themselves. And in these moments of the truth. Nerve with four simple words that are whispered by the fearlessly since the time of the Romans.

The bombast was not accidental. For true believers, a technology like crypto is never just a technical solution or a promise to quickly get rich. It's something like a historical mission. If you believe the vision, then Joseph Schumpeter's concept of "creative destruction" is obvious, with his confident promise that something better will arise from the rubble of the old.

There are circumstances under which this brutal vision of history is appropriate, but the billion dollar question is which historical experiments are worth the costs and which are not. The distinction between the two requires the ability to distinguish between things that appear brave and sexy, and those that actually make sense.

the Romans, which is assumed that he was the first to say the words "that favors the brave", was Pliny the elderly when he witnessed an outbreak of the Vesuvi in ​​79 AD. Instead of doing the obvious and taking cover, Plinius ordered his flotilla to be headed directly onto the inferno in the hope of saving survivors. He died in the middle of swaths toxic volcanic fases.

Neither Damon nor Tom Brady and Gisele Bündchen, the FTX, the battered cryptocurrency exchange, supported such fate. True believers in the crypto amount will not be put off by one or two bankruptcies. It is due to the US authorities not only to clean up the chaos that FTX has left, but also to make a judgment on the self-proclaimed historical mission of crypto. This is inevitable political.

In order to stop every highly cheered technological project that promises to disturb the status quo and create a brilliant new future, determination, courage and real authority are required. And there is no guarantee of success.

In the case of crypto, politics is particularly tricky. The uncomfortable truth is that FTX's management was one of the largest donors in the Democratic Party among the recent interim elections. It is far -fetched to say that this has significantly influenced the result. But tell the republican arsonist Senator Josh Hawley, who seems to be determined to transform Sam Bankman-Fried's business into a Célèbre.

The Democrats also did not simply take money from FTX. A loud faction in the US Congress urged laws to define a new regulatory system for crypto. While the banking supervisory authorities remained unapproachable and the Securities and Exchange Congress seemed suspicious, the Commodity Futures Trading Commission seemed to be keen to take on the task. In the top of it, it received encouragement by an executive order of President Joe Biden, who declared digital assets to be an area in which the United States is not allowed to fall behind international competitors.

In the summer of this year it seemed that the urge to recognize and regulate crypto could achieve the same dynamic that led to catastrophic deregulation of Wall Street in the name of the modernization at the end of the 1990s.

The chaos that was uncovered at FTX should stop this train. The most radical alternative would be easy to burn crypto himself. Let the snowball systems collapse under your own weight. If you are chasing fraud through the usual law enforcement channels, you do not offer any official supervision. Make it clear to everyone who deals with crypto to do so at his own risk.

In view of the isolation of crypto from the rest of the finances, such malicious neglect may not be a serious systemic risks, but the costs for small investors could be serious and thus the political consequences. Letting crypto burn down may no longer be realistic. If this is the case, it is urgently offered that the regulatory authorities no longer put an eye on, but draw the clear limit as possible. You should not simply refuse to appreciate the official approval, you should prevent regulated financial institutions from dealing with crypto overall. If there is a regulation, this should be done under the heading gambling and not under the banking section. This will annoy the crypto lobby that will accuse the regulatory authorities of wasting America's priceless lead in a world-changing technology.

The best answer to this rhetoric is of historical necessity to answer directly. If it is true, as Damon warned that the story is "almost filled", it is not simply due to a lack of nerve strength or happiness. Most historical activities fail like most companies because they are poorly thought out or encounter excessive resistance. Blockchain can have some limited uses. Crypto tokens in their simplest form will never be money. Sensibly reduced, you can serve as a form of online gaming. However, what you shouldn't matter is serious finance, not to mention complicated and opaque financial engineering. It is time to throw these chimars into the trash can of history.