“Pump-and-Dump” schemes in Telegram groups drive penny crypto coin prices up

Ultimately it comes down to whether you think top down processes are more effective, or bottom up ones. I personally know some older people who wanted to invest in Ripple. They talked to me about it and I made them promise not to do so, and to always check with me before investing in any cryptocurrency. That's a bottom up adaptation that makes a couple individuals safer. Sure the government could have just banned them from investing in Ripple, but that's a crude (and Big-Brother-ish) solution that's going to have untold numbers of unintended consequences.

Our cognitive biases will prefer the top-down solution, because it's easier to reason about, but I would argue that reason and evidence tells us that bottom-up works better in the long run. A billion micro-adaptations are exponentially better than a couple macro ones. The world is far more complex/detailed than any regulatory agency can handle.

==I'm rate limited, so responding to Sangermaine's comment below after this point==

>>What if, instead of these older people having to happen to personally know someone knowledgeable about crypto like yourself, or knowing how to find one and not get duped in some forum, there were regulations requiring public disclosure of various information regarding cryptocurrencies and their backers? You know, like we already have for securities? Then these older people could research this information and decide for themselves what to do, which seems to be what you advocate.

You're looking at current regulatory restrictions through rose-colored glasses. The current law requires far more than just disclosure. It also requires having a certain number of 'market professionals' (as determined by the regulatory agency) vet the offering, and for the agency itself to vet it and give it approval before the issuer can offer it to anyone other than the rich (accredited investors).

This inevitably leads to the cost of publicly offering a security to run into the millions of dollars.

There are massively negative unintended consequences from raising the financial barrier to capital raising. Just because they're not directly felt, doesn't mean they aren't just as impactful as the more direct negative consequences that such a blanket restriction would ameliorate.

Look, there are no perfect solutions. We have to think about this in terms of long-term impact, and trade-offs. The long-term result of preventing politicians from imposing laws that violate people's right to do with their own money what they wish, is the emergence of a relatively more vigilant investing public, that generally knows better that it has to do due diligence, and that through experience, some of it bitter, has developed relationships with individuals they can count on to help them with their investment decisions.

The alternative is that we create a centralized gatekeeper and presumably that will stop more scams, but that also stops more opportunities. We would be taking away people's agency, and replacing the billions of decisions that the investing public would have collectively done, with the much smaller set that a regulatory agency does when making judgements on what people are permitted to invest in.

>>"Allow everything" or "ban everything" aren't the only options, never have been, and in the real world aren't.

I never suggested allowing everything. I think fraud should not be allowed. But I don't think we should preemptively ban everything that falls within some broad class of economic activity that has not gotten the approval of some gatekeeper.

Public choice theory would suggest that the iteration is happening on the political and public manipulation front, with rent-seeking market incumbents growing more effective at selling the public on the need for steeper barriers to market participation, and persuading political representatives to institute such barriers.

The story of the "Money Services Round Table" would be a good example of this:

http://www.aarongreenspan.com/writing/20110510/in-fifty-days...

Some empirical evidence:

https://www.mercatus.org/system/files/McLaughlin-Regulation-...

The answer seems to be that repressive countries haven't yet put in place effective mechanisms to be repressive with respect to bitcoins. But there's zero reason intrinsic to bitcoin to expect that to continue. On the contrary, since everything is digital the choke points are easier to control, not harder.

Trying to explain something like Bitcoin just seems like you’d have a hard time meeting reasonable doubt standards in a dispute but that’s not the only model.

The point is that, in general, deception for financial gain is fraud, more or less by definition. It doesn't have to involve regulated securities.