There are no regulations needed to go after fraudsters. If someone is committing fraud, they can be prosecuted under common law.
So this space is not rediscovering anything. Everyone supports fraud being prosecuted.
What everyone doesn't support is the creation of a centralized gatekeeper and a preemptive blanket ban on an entire category of digital value/information exchange, that is only lifted on a case-by-case basis if one is approved/registered by/with that gatekeeper.
In other words, people oppose a law being passed to treat non-security tokens the way securities are treated now. That would be disastrous for personal freedom and economic evolution.
This is apparently written from theory, not from data. Actual successful financial marketplaces, like the ones I named, have much more stringent regulations than that. Why? Because waiting for a fraud to blow up and then hoping the police can crack down on it is immensely damaging. Not only to the people who get suckered, but to everybody who hopes to use the marketplace.
Think of it like food safety laws. In theory, the marketplace would take care of this, driving unsafe restaurants out of business through the magic of the invisible hand (plus a lot of visible vomiting from food poisoning). In practice, though, everybody supports food inspectors, food safety ratings, etc. Even restaurant owners, because they want people to not even think about safety. A trusted, regulated marketplace benefits all sincere participants.
> What everyone doesn't support is the creation of a centralized gatekeeper [...]
Sure. And we'll see how that works out.
Historically, gatekeeping behavior both from regulators like the CFTC and the SEC and from marketplaces like the NYSE and NASDAQ arose in response to problems. It's not something people just made up.
Now that the same problems are happening here, I expect there will be some response. Partly, it is regulators coming along and applying existing financial laws. Partly, it will be investors abandoning the whole asset class. But there's also room for the industry to self-regulate. Will the antiregulatory fetish, as typified by your response, win out? Or will, as often happens with other industries, some self-regulation happen?
I look forward to finding out.
There is no data to support your assertion. We don't have a control to see what the effect of regulation has been. How can you confidently conclude that regulations made the markets more successful, and that a traditional deterrence approach to fraud wouldn't have worked even better? You can't.
>>Think of it like food safety laws. In theory, the marketplace would take care of this, driving unsafe restaurants out of business through the magic of the invisible hand ... In practice, though, everybody supports food inspectors, ... A trusted, regulated marketplace benefits all sincere participants.
You have not provided any evidence for your last assertion. A policy being wildly popular doesn't mean it's socially constructive or ethical.
>>Historically, gatekeeping behavior both from regulators like the CFTC and the SEC and from marketplaces like the NYSE and NASDAQ arose in response to problems. It's not something people just made up.
Of course, and the War on Drug arose in response to the problem of drug abuse. Alcohol Prohibition arose in response to alcohol abuse. The Iraq invasion and Patriot Act arose in response to terrorism. It doesn't mean the response is either ethical or socially constructive.
>>Now that the same problems are happening here, I expect there will be some response. Partly, it is regulators coming along and applying existing financial laws. Partly, it will be investors abandoning the whole asset class.
I suspect neither of these things will happen. The sector will remain effectively unregulated due to the near impossibility of censoring cryptocurrency transactions, and investors will wisen up just as they have for the last six years in cryptocurrency. Online server side wallets use to be a big thing in Bitcoin. After a string of exit scams and hacks, the collective intelligence increased, and cryptocurrency communities began strongly urging people to avoid such wallets. I suspect a similar spontaneous evolution will happen with token sales as the community matures.
All gatekeeper regulations will do is rob the US of business and cause unnecessary human suffering for those caught in the dragnet.
>>But there's also room for the industry to self-regulate. Will the antiregulatory fetish, as typified by your response, win out? Or will, as often happens with other industries, some self-regulation happen?
It is not a fetish to not want to be subservient to a centralized gatekeeper and be forced to get permission from it to interact with other adults. It is belief in the basic value of human freedom.
The data is called "history".
The US started with no financial regulation; we got regulations and regulatory agencies over time, mostly in response to problems. The exchanges whose history I'm familiar with started small and became more internally regulated over time, again in response to actual problems. Those exchanges were generally run by traders, who are dispositionally anti-regulation. But they are also strongly motivated to have smooth-running marketplaces that are generally trusted. So they made some tradeoffs and found ones they were pretty happy with.
The fact that no devil-may-care marketplace has survived, and the fact that countries with successful financial marketplaces have all converged on similar approaches is as reasonable set of evidence that regulation has value to market participants. You will never really have a control group, because the "no regulation" control group fails hard enough that it isn't sustainable.
> A policy being wildly popular doesn't mean it's socially constructive or ethical.
It doesn't prove it, but for regulations that are popular with all sorts of market participants, it's excellent evidence. The alternative explanation, that you alone are way smarter than all the people who are experienced professionals on many sides of the marketplace, is not particularly persuasive.
> It is not a fetish to not want to be subservient to a centralized gatekeeper and be forced to get permission from it to interact with other adults.
Sure. A desire only becomes a fetish when the desire becomes hugely dominant, pushing all rational consideration aside. Which I believe is often the case in the cryptocurrency/ICO space. For whatever reason, cryptocurrency advocates often value the "you're not my DAD" kind of freedom way more than they value success.
As an example, look at Bitcoin. 8 years in, and its real-world, non-criminal use is approximately zero. That's despite all the hype about Bitcoin international money transfers, Bitcoin shopping, Bitcoin ATMs, et cetera, ad nauseam. In roughly the same time M-PESA has ended up with 30 million users and 6 billion transactions per year. And those are actually useful transactions, not financial speculation.
I have no beef with cryptocurrency advocates pursuing their personal desire for radical independence. Godspeed, and may their Heinlein novels find a nice spot in their seasteading cabin. But I do object to the enormous ahistorical hype and denial that has gone along with it.
It's fine to say, "Well, sure, regulation would make things better for many practical use cases, but we think a high endemic level of fraud and low real-world impact is an ok price to pay for the very narrow kind of freedom we're dedicated to." But I don't appreciate the quasi-religious evangelicalism about the magic power of technology and markets to make everything sunshine and rainbows; and the concomitant notion that the rest of society should just follow their vision and values, never mind the human cost.
