Regulate Crypto Immediately or "Let it Burn"?

Sam Bankman-Fried Needs to Lawyer Up, Get Smart, and Stop Talking

Bankman-Fried may think he’s helping himself by making FTX’s collapse sound like a business mistake rather than a colossal fraud. But prosecutors can pick apart his public statements for inconsistencies and use his statements to show the extent of his knowledge or the facts that he has conveniently forgotten now that he faces scrutiny.

Under US rules of evidence, Bankman-Fried could not introduce his own statements in his defense at trial because they would constitute hearsay. But the government could use his statements against him.

This one-sided rule means that his statements can only hurt him and never help him. So, a good defense would start with remaining silent.

How to Start Regulating the Crypto Markets—Immediately

We, two markets regulators—one who served under President Obama and the other under President Trump—believe that government action should rest not on one view of the future or another, but on the hard-earned lessons of the past. We also know that a search for a comprehensive plan carries significant “Waiting for Godot” risk. The fact is billions of dollars a day in transactions continue to take place, while fraud and theft—in forms as old as the bazaar and as young as a computer hack—remain common. In our experience, immediate action is best pursued incrementally, taking complementary steps that are free from challenge, both on authority and principle.

We have three recommendations for U.S. regulators....

Let crypto burnIn the aftermath of the collapse of FTX, authorities should resist the urge to create a parallel legal and regulatory framework for the crypto industry. It is far better to do nothing, and just let crypto burn.

Actively intervening would convey undeserved legitimacy upon a system that does little to support real economic activity. It also would provide an official seal of approval to a system that currently poses no threat to financial stability and would lead to calls for public bailouts when crypto inevitably erupts again.

Crypto and SPACs are a Doomed Match in the Eyes of the SEC

Banker Bob Diamond was forced to pull the ripcord this week on his attempt to take stablecoin issuer Circle Internet Financial public via a special purpose acquisition company.

The ex-Barclays Plc boss’s dealmaking ability probably wasn’t the issue. Nor was the target’s financial performance: Circle earns interest income on the reserves that backstop its stablecoin USDC, and rising interest rates have thus benefited its bottom line.

Instead, the party pooper was almost certainly the Securities and Exchange Commission. Following the collapse of crypto exchange FTX in November, the regulator’s already elevated wariness of crypto is now at DEFCON 1. Trying to match a crypto company with a SPAC — another financial invention unloved by the SEC — is therefore a Sisyphean endeavor.

Ripple, SEC make final bids for a quick win in XRP lawsuit

Ripple and the U.S. Securities and Exchange Commission accused one another of stretching the law, as they argued for a ruling on whether the XRP, the world’s seventh-largest cryptocurrency, is a security.

Both sides urged U.S. District Judge Analisa Torres to rule in their favor without sending the case to trial in papers filed on Friday.

The final round of briefs seeking summary judgment brings the case closer to a ruling that could further define what digital assets are considered securities in the U.S.

Wall Street Veteran Is the Face of Crypto in Ripple-SEC Fight

Stuart Alderoty is giving the US Securities and Exchange Commission its toughest fight against crypto regulation in one of the industry’s most important tests, even as the FTX debacle grips the world of digital assets.

Alderoty, a 63-year-old lawyer, has spent most of his career working for traditional financial players. As chief legal officer for the payments company Ripple Labs Inc., he’s now at the center of a scorched-earth litigation and public relations battle against the SEC its chairman, Gary Gensler.

“They want to exert power that the law doesn’t otherwise give them,” Alderoty said in an interview in Washington prior to FTX’s bankruptcy.

Small Investors Who Jumped Into Crypto on FTX Say, Now What?

In early November, Adrian Butkus, a 43-year-old father of two, put $600,000 — much of his life savings — into an account at BlockFi, a cryptocurrency trading firm. BlockFi had marketed the account as risk free, yielding 6.5 percent interest, more than Mr. Butkus could get anywhere else.

Just days later, as the collapse of the cryptocurrency exchange FTX shook the entire crypto industry, Mr. Butkus asked BlockFi for his money back. But the firm had suspended customer withdrawals, citing its close financial ties to FTX. By late November, BlockFi, too, had filed for bankruptcy.

Mr. Butkus doesn’t know when — or if — he will see his money again. He is one of millions of individual investors around the world who poured money into digital assets, believing the cryptocurrency industry was a stable financial system. They were cleareyed about the volatility and big price swings of Bitcoin and other cryptocurrencies. But what has come as a big surprise to many is that the firms where they deposited their money lacked the basic protections offered by a brokerage or a bank.