The Crypto Story Matt Levine Download

[Sumiko Fagnoni]

I really enjoyed the story and one thing that I liked about it was because I think it really tied together what the current financial system and the crypto financial systems really have in common. In some cases you'll see business models directly ripped off from the traditional financial system and others you'll see things that could never happen.

the crypto story matt levine download

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Just to wrap it up, you've covered a lot of stuff in the crypto space, particularly talking about the preponderance of scams and how easy it is for this stuff to happen. In this story you took the perspective of you didn't want to talk about "exciting people," which I think is oftentimes the principle that people start from. How was that, writing a crypto story without talking about a fascinating individual who may have absconded with a bunch of money to the Cayman Islands, or talking about somebody who drives Lambos?

That said, I do write a little bit about how crypto has found interesting new ways to do that. I think one thing that's really truly interesting about crypto is that Satoshi just invented bitcoin and then it became worth thousands and tens of thousands of dollars. That is not exactly something that's never happened before in human history, but it's kind of like that!

Just to wrap it up, you've covered a lot of stuff in the crypto space, particularly talking about the preponderance of scams and how easy it is for this stuff to happen. In this story you took the perspective of you didn't want to talk about \\\"exciting people,\\\" which I think is oftentimes the principle that people start from. How was that, writing a crypto story without talking about a fascinating individual who may have absconded with a bunch of money to the Cayman Islands, or talking about somebody who drives Lambos?

There\u2019s an old saw to the effect that the best way to make money in a gold rush is to sell shovels. And I took that to be SBF\u2019s strategy. It didn\u2019t really matter whether it was a real gold rush or a fool\u2019s gold rush; he had an opportunity to sell shovels. The fact that SBF was not a particularly strident true believer in crypto seemed not like a true confession that the whole thing was a scam, but like an appealing piece of self-awareness. His stated goal for FTX was to become a software platform for trading all kinds of securities and financial products so as to become less of a \u201Ccrypto\u201D company. That would have made perfect sense as a narrative arc \u2014 start at Jane Street doing arbitrage trades, then strike out on his own doing crypto arbitrage, then build tools for trading crypto, and then build general trading tools. The crypto itself is just a ladder that\u2019s cast aside.

Jeff Roberts from Fortune writes that SEC chair Gary Gensler \u201Cis gunning to be Treasury secretary after Janet Yellen leaves the post\u201D and \u201Cis doubling down on theatrical enforcement actions in hopes of pleasing Sen. Elizabeth Warren, who has President Joe Biden\u2019s ear on financial policy.\u201D This story is plausible but doesn\u2019t quite add up. If Gensler wanted a bigger role in Biden\u2019s government, it would probably look better if he was actually tough and effective on crypto, rather than just pretending to be and failing.

A second explanation is that the SEC is being aggressively lobbied by the crypto industry and that democratic politicians have been bought off with crypto money \u2013 a story of regulatory and political capture. This one isn\u2019t super compelling either, though. Sam Bankman Fried of FTX and Brian Armstrong of Coinbase sure do lobby and donate, but they can\u2019t be happy right now.

A third explanation is that the SEC is busy and that crypto is too low on their priority list. Honestly, this probably explains like 70% of the story. Equity and debt markets are orders of magnitude larger and more consequential to people\u2019s lives, so it would make sense that they get all of the attention. A related hypothesis is that the SEC is underfunded or short-staffed. Maybe they could use a bigger budget for crypto enforcement. Or maybe their crypto lawyers are underpaid and are all getting poached by the industry.

A fifth explanation is that crypto is inherently censorship resistant, so regulators have limited tools to enforce laws. This is a nice story but it\u2019s BS. The vast majority of people come into contact with crypto through centralized exchanges that have deep links to the traditional financial system: the on and off ramps where people exchange regular money for tokens. It\u2019s only a minority of people that have self-hosted wallets on-chain, so regulators do have significant leverage.

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