The wild world of cryptography needs better health warnings

When my dog ​​discovered a fox in the garden, he immediately stands tight and growls quietly on the glass door, with the curly cock vibrating into his area from irritation over this penetration. He will surely show this fox who the boss is. Every moment.

London's foxes are a fearless bunch that will be done with a fight, and when you see how he shouts at her from his cozy inner world, they don't pay attention to him. Only when they decide to leave the garden on their own does our spoiled dogs begin to bark to be let out and shoot outside to demonstrate its dominance, in the certainty that the aggressive wild enemy has already jumped over the fence.

And so it is with crypto. Financial supervisory authorities and central banks have been whirling towards the crypto industry behind their glass doors for years. They repeatedly said these tokens have no inner value. Anyone who buys them should be ready to lose everything without recourse. The warnings did little to the industry.

Now, however, barking is suddenly louder, more impressive and more assertive. Since FTX's implosion, one of the largest and allegedly most reliable stock exchanges, the authorities have increased the volume of their warnings.

"There are finally more people who blow the Bullshit pipe," said Senator Elizabeth Warren of the Semafor news agency in a cumbersome but still effective turn.

Other heavyweights have been added. US Finance Minister Janet Yellen described Krypto as "an industry that really needs adequate regulation. And that doesn't."

The thing is that the regulatory authorities took so long to get to this point that some have come to the opinion that they shouldn't take the trouble to regulate the stuff correctly.

That was the view that the European Central Bank was expressed at the end of the last month. In an unusually powerful blog post entitled "Bitcoin’s Last Stand", the ECB dipped into the crypto industry from a great height. The price stability of Bitcoin - the biggest sign at all - is "an artificially brought -out last breath before the way to insignificance," wrote General Director Ulrich Bindseil and consultant Jürgen Schaaf. It is "hardly used for legal transactions", is "cumbersome, slow and expensive" and is an "unprecedented polluter". You have the idea and you can imagine the feedback that this has received from the real crypto believers.

But regulation, they added, "can be misunderstood as approval". This is a good point: the impression can arise that crypto tokens are just like stocks, bonds or other regulated investment products.

This contributes to the argument that some have brought up to simply burn crypto. We have already seen how unsuspecting stock market speculators can be attracted to something that looks like a professional trading center. The installation of logos of the regulatory authorities on these pages could very well reinforce the impression of an official supervision.

This is not the only reason to use crypto to wither and let die. Others are that turbulence in the crypto industry has left the rest of the financial system intact. In addition, determined crypto buyers often use VPN connections to the Internet in order to bypass national regulations, which means that some elements of regulation become a waste of time.

But the timing here is unfavorable. As the ECB blog states, the EU regulation on markets for crypto-assets (mica) finally slowly awakens. At a recent FT event, I asked Verena Ross, chairwoman of the European securities and market viewing authority, which leads these efforts, whether the effort was worth it.

Maybe she said yes. The boundaries between traditional finance and crypto "blur", she said. For example, crypto tokens are listed on the same trading platforms as tokens with alleged compounds to regulated shares. "Therefore to close the eyes and say that this should remain in the speculative area and it is a casino that nobody wants to enter, I think it is a little short -sighted," she said.

ross acknowledges that in the gap between the tails of the regulatory authorities that begin to bitch, and the legislators who finally run away to claim their authority, these tokens have become known as assets. Betting on you is called investment. Token collections are referred to as portfolios. Krypto has entered the lexicon of mainstream investments without the associated rules and supervision.

For amateur investors, it is completely reasonable to believe that they try something with a certain degree of protection and supervision. Where do the top -class campaigns to sensitize the public say that this is not the case? Where are the warnings of addiction and the high loss rate that you see on authorized spread-bed websites?

It is tempting to snap some popcorn and just to watch how crypto implodes, in particular to avoid that the supervisory authorities seem to be approved something that they can never fully control. Even if the world optes for adequate global regulation, it could take years to formulate and implement it. But unsuspecting players don't deserve to be collateral damage here. Better public warnings must be part of the solution.

katie.martin@ft.com