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Comment by conanbatt | Hacker News Reader

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard.

I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose the money, but if you create the expectation that the sec will protect you as a consumer from the scams, then we will not be sophisticated to actually organically ignore scams.

What will happen next, FDIC and too big to fail institutions?

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You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

Worked great in 2008.

It's like people assume the current financial system is perfect and bitcoin is not. Bitcoin never pretended to be, it's still an experiment 10 years in, but its a fun expierment.

It’s fun while it’s worth a bucketload. When people start losing their shirts and dumpster loads of ASICS are being burned for cooking fires... less fun.

(Some hyperbole engaged above)

There's a massive difference in crypto over fiat. In the US, if you have a debt they can take back your home, you can get harassed and taken to court.

The stakes are not that high for crypto wealth. Its unenforceability makes the stakes a lot lower for tragedy.

You know what? It did. You still have running water. Government employees like cops and firefighters and teachers are getting paid (sometimes not enough).

So yeah, it worked great.

"People in Africa are starving, so you're having a great day!"

Bullshit argument, I'm sorry.

I didn't say it was perfect. I doubt that whatever "organic" solution we're hoping the crypto community will self-enforce will be either.

If something bad happens, it will be the will of the 51%, not the .01%.

It actually did. The market was on it's way to crashing harder than the great depression, but it didn't, probably thanks in some part to government being able to intervene and control monetary policy

Have you ever heard of the phrase "kicking the can down the road"?

You can play this argument ad infinitum without actually adding anything of value to this conversation.

Central banking is not perfect, but it has a better track record of stability and growth than any other system that’s been tried at a large scale. Try and remember that the alternatives aren’t optimal economic systems that are immune to bubbles, recessions, depressions, hyperinflation, corruption and manipulation.

If anything the Bitcoin experiment is reinforcing why we have existing regulations in place.

How do you know that it has a better track record of "stability" and "growth" than any other system at a large scale? Much of America's growth in the late 19th happened without any central banks in 1913. Most of "depressions" happened prior to that -- and there were 4 such major ones in the 19th century and many of them were directly caused by the govt policy changes -- were nowhere as severe as the Great Depression occurred after the creation of the central banking in the US.

You mean the gov't regulation prevented the GD that it created?

A very large amount of Bitcoiners absolutely insisted we were headed towards hyperinflation due to QE back then. In fact that was the very reason a lot of them were interested in Bitcoin in the first place.

Interesting how things have worked out. They were right about Bitcoin's value, but badly wrong on all of the economic related predictions.

Holder, in testimony before the Senate Judiciary Committee, after, well, not doing his job prosecuting banks: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Soon after he was done with his effective regulation, according to you, he returned to his job...defending large financial institutions...at Covington & Burling LLP, D.C. law firm.

It did and it didn't. On one hand, we stopped a panic that would have led to a true depression. On the other hand we did so by actually increasing the power and wealth of many of the people and organizations responsible for creating the conditions that led to the panic.

Do that long enough and you get a civilization run by overconfident incompetents and shielded fraudsters. That build up of delusional bozos at the top is one of the things that eventually leads to collapse.

Bitcoin was in some ways a protest in code form. Why can't we create a software defined monetary system that is transparent and where corrupt and incompetent human orgs can be replaced by algorithms?

I like that idea, but Bitcoin itself was really just a proof of concept. We're not there yet. In the meantime we've gotten a silly bubble that's starting to look like a parody of the project's original goals.

>> You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

> Worked great in 2008.

Wasn't 2008 at least partially the result of having banking regulations withdrawn/weakened over the prior decades?

If so, isn't it pretty bogus and misleading judge the effectiveness of financial regulation from that event? It's like saying airbags don't help in a crashes, because yours was removed and you smacked your face against the steering wheel in a crash.

You still had a system that decided removing airbags was a good idea. Then, when getting smacked in the face, doing nothing to the people involved in removing the airbags or causing the face smacking.

That doesn't really reflect on the suitability or effectiveness of regulation to address the problem. Greedy, ignorant people who failed to study and learn from the past can be the decision-makers, too.

Then you have a systemic problem allowing greedy ignorant people to be decision makers. Not sure how to fix this, but I believe there is a solution.

I disagree vehemently to this proposition. I have never agreed or voted to get those regulations in place. They are not voluntary. But anyone falling for tether today is making an individual decision.

Just because you personally weren't consulted on those regulations doesn't mean that they weren't come to by people who were democratically elected. And you agreed to abide by the laws of a jurisdiction by living there. Otherwise, what's to stop you from saying, "I never agreed not to kill people"?

> And you agreed to abide by the laws of a jurisdiction by living there. Otherwise, what's to stop you from saying, "I never agreed not to kill people"?

Nobody agreed to not kill people either. Thats why killing is also legal in many circumstances. Also arguing that we all agreed to the rules there in would mean that if slavery were legal it would be ok, becase we all agreed to it. But thats another topic.

The point is that if I believe in an institution without regulation the option between me and that institution is severed by an unrelated third party. I dont want to ask the SEC any permission to buy tethers.

"Also arguing that we all agreed to the rules there in would mean that if slavery were legal it would be ok, becase we all agreed to it"

No. That's a poor argument that, in this case, falsely equivocates slavery with financial regulation.

"I dont want to ask the SEC any permission to buy tethers."

That's not what's happening in the least. But if Tether is a scam, then it will be shut down, as it should be. And no amount of "freedom" will justify running a scam on other people.

> No. That's a poor argument that, in this case, falsely equivocates slavery with financial regulation.

You say its a poor argument, but you dont say why.

> That's not what's happening in the least. But if Tether is a scam, then it will be shut down, as it should be. And no amount of "freedom" will justify running a scam on other people.

Tether will crash itself if it doesnt have the money its supposed to have, we don't need the sec for that ,the same way the SEC didnt start the 2008 meltdown or Enron's demise. Its even more egregious if you consider tether is not in the US and affects non-US citizens the most. So why has the SEC the power to intervene in other countries with people that haven't elected them?

Its purely an act on a position of power, not on agreed rules, and thats some of the spirit that sorrounds crypto. Crypo will be more mature if it deals with this problems without government intervention.

> I disagree vehemently to this proposition.

I haven't made a proposition. I just pointed out that historically, when societies have made decisions about this sort of thing, they've generally decided that such individuals require protection via regulations.

In general, most of the laws we are expected to follow are not ones we personally agreed to or voted on. I'm not sure that makes them less "organic." If you're arguing that you should not be expected to follow laws that you didn't personally agree to, I think that's a bigger conversation.

Actually, historically all governments started through conquest (military victory), not social contracts. Societies didn't make any decision - governments did, and societies accepted the status quo.

But governments didn't invent society from atomized individuals through conquest. All government did was add another layer in addition to the organically developed pre-existing social contracts.

>> You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

> I disagree vehemently to this proposition. I have never agreed or voted to get those regulations in place. They are not voluntary. But anyone falling for tether today is making an individual decision.

Nevertheless, you benefit from them. It's not like you have to sign up to the regulation that makes your murder illegal. Don't you think it would be foolish to expect every generation to have to rediscover, through trial and error, the benefits of society and government?

An important distinction has to be made between law abiding and regulation.

Law against murder is: if you do it, you will be jailed.

Regulation against murder is: you cant have anything that harms another human being, and we need to check you up regularly to make sure you haven't killed anyone.

Regulation is not abiding for the law. Thats what lawsuits are about. Regulation is about preventing law to be broken with preventive measures.

> Don't you think it would be foolish to expect every generation to have to rediscover, through trial and error, the benefits of society and government?

I wish we had that, but we can't, we have to live entire generations with laws designed by previous ones. Isn't the drug war on the US a prime example of that? If you put it up for a vote, the majority would vote to make it legal or not prosecute it.

But this is not a topic about the mere existence of government, its about an ecosystem that was born and fueled about how the government and the banks crap on people, and trying to make it better with banks and government is going the other way.

I think you're confused about the differences between a law and a regulation. As I understand it, at least in the US context, regulations are rules specify the finer details of the implementation of a law. You can be jailed for the violation of a regulation [1].

> I wish we had that, but we can't, we have to live entire generations with laws designed by previous ones.

There's an expression that describes your attitude, it's "throwing the baby out with the bathwater." The thing about "the laws designed by previous [generations]" is that most of them are good, and the ones that aren't will eventually be abolished or modified, in a democratic society.

> and trying to make it better

The attempt is ignorant "disruption" that's repeating, word for word many of the long-solved mistakes of the past. If you want to make something better, you can't focus on the just problems of the current solution, but you also have to focus on all the problems the current solution already solved. To do otherwise is foolishness.

[1] For example, https://en.wikipedia.org/wiki/International_Traffic_in_Arms_... lists several instances.

> I think you're confused about the differences between a law and a regulation. As I understand it, at least in the US context, regulations are rules specify the finer details of the implementation of a law. You can be jailed for the violation of a regulation [1].

Sure, but violating the regulation has no victim. If you sold lemonade on a stand in california, you would be breaking regulations but there is no victim that would ever sue you for damages.

Regulations, at least in general, about preventing something from happening by restricting action. Legal action is about responsibility: if something happens you are going to be accountable for that which happened.

Tether deserves a lawsuit on fraud, because they committed fraud. But we don't need the sec for that.

> There's an expression that describes your attitude, it's "throwing the baby out with the bathwater." The thing about "the laws designed by previous [generations]" is that most of them are good, and the ones that aren't will eventually be abolished or modified, in a democratic society.

Tell that to all the people doing 25+y for doing or dealing pot. They must agree with you!

> For example, https://en.wikipedia.org/wiki/International_Traffic_in_Arms_.... lists several instances.

I'm no expert on arms dealing but isnt the US Gov the one that gives out the most weapons to radicals? I thought the US as a successful exporter of weapons..and certainly of violence!

Don't miss the fact that regulation is excercised by people with the same incentives as anybody else, but with more power.

> Tell that to all the people doing 25+y for doing or dealing pot. They must agree with you!

> I'm no expert on arms dealing but isnt the US Gov the one that gives out the most weapons to radicals? I thought the US as a successful exporter of weapons..and certainly of violence!

I feel like you're just going for cheap points, but the thing is you don't even get those if you can't stay on topic. It's kinda pointless to talk with you if you keep running off on random tangents. Aren't we talking about financial regulation?

Actually, I'm not even sure if there's anything to your comments beyond an emotional hostility to the concept of regulation or something represented by it, so maybe we're not even communicating at all.

I didnt bring guns and arms dealing into the debate, that was you. I mentioned the war on drugs as an example of old laws that would not be voted on today, and the argument of keeping them because they must be good is destroying lives today.

The SEC is killing people today as well. Its barring most of the world on investing in the US on startups that could lift people out of poverty, increase quality of life and even help in fields like medicine, etc. And the ICO market is an example of how much demand for investment there is. The lesson is not that unregulated markets have scam artists and fraudsters, that we always knew, what is new is that the regulated market is silently opressing.

And to add insult to injury, the most egregious cases of mis-regulation have made the regulators screw over the general population instead of the institutions they failed to regulate.

On this very site ,most people can invest in the startups they read about everyday and work for everyday.

> I mentioned the war on drugs as an example of old laws that would not be voted on today, and the argument of keeping them because they must be good is destroying lives today.

You're arguing with a straw man of your own design.

> The SEC is killing people today as well. Its barring most of the world on investing in the US on startups that could lift people out of poverty

Jesus, that's the most ridiculous, hyperbolic thing I've read this month.

> Jesus, that's the most ridiculous, hyperbolic thing I've read this month.

Its basic microeconomics. You will learn a lot of read about it!

> Its basic microeconomics....!

Ah, that explains it. You know just enough to be dangerous.

>and then find organic solutions.

I don't understand this perspective. You have a proven, verifiable, simple solution right in front of you. Then you ignore it with some skimpy platitude to dive right into economic mythology.

Regulation is the correct solution.

> Regulation is the correct solution.

I once read (here, perhaps) that Bitcoin is a long demonstration in how regulation comes to exist.

I think many in the Bitcoin community conflate "regulation" with "monetary policy". They assume if bitcoin is treated like money, with laws that protect people from fraud, that must somehow lead to restrictive monetary policy, which the community tends to abhor.

> Bitcoin is a long demonstration in how regulation comes to exist.

Or perhaps a short demonstration, given that BTC appears to be recapitulating the entire history of currency in a few years?

Exactly. It boggles my mind that people can't grasp the difference between the two. I hate the fed and the department of the treasury, and think QE is a horrible policy just like our permanent deficit. But I happily welcome the SEC and FINRA getting involved in cryptocurrency.

I disagree. If the state wants to offer some certification of regulation and an exchange is willing to go through that process to capture consumers, let them be.

Thats not bitfinex nor tether. Let people choose. If the SEC had its way, bitfinex would have not existed and millions of people wouldn't have been served.

History has shown that in certain matter people will, over and over again, commit systemically wrong choices.

So no, in some things we're all in this ship together and as long as that's the case I want people to not collectively fuck things up.

Thats what you want. Why do you feel entitled to make other people do what you want?

Why do you think seat belts are mandatory? Apply the same reasoning to your question.

For the wrong reasons. I dont think they should be mandatory at all.

Apply the same reasoning: check.

But this case is even worse. Its the sec regulating a foreign exchange that has foreign investors. You think the SEC can go and try to do that on alibaba?

The only thing that makes him entitled is learning from history and being able to reason about pretty elementary models in his head.

Why do people with your types of opinion always make it wholly personal, just to try to weasel their way around a subject?

Like, here's another comment you made:

>I like to compare Bitcoin to Land.

Just stop. There is so much fundamentally wrong with that analogy at face value it beggars belief that you are being sincere.

> The only thing that makes him entitled is learning from history and being able to reason about pretty elementary models in his head.

That is his opinion, and even if it were factually true it doesnt give him the entitlement to prevent other people from doing it. If he believes the SEC provides value he can go to SEC regulated places, and let the ones that don't just be.

Today, the SEC regulates the startups right here, depressing wages of workers, reducing founder's returns, increasing investor returns and reducing overall market size. That is an economical fact. The steam of that oppression is coming out in crypto, where millions of people worldwide have a chance to 'invest' or speculate in something they are otherwise barred from doing. Barred by institutions like the SEC.

Crypto in spirit and technology is a way to get around those involuntary and foreign restrictions.

> Just stop. There is so much fundamentally wrong with that analogy at face value it beggars belief that you are being sincere.

I've made my case about it. You don't have to agree with it, and I dont have to agree with you. Do you want to call someone else into this to make sure neither you nor I say the wrong thing at punishment of fines and jail?

>and even if it were factually true it doesnt give him the entitlement to prevent other people from doing it.

Yes it does. In the same way I'm entitled to prevent people from drunk driving, because we know it's factually a bad idea and likely to end in a pretty nasty mess.

>I've built my case about it

In the same way you can build a ship designed to sink maybe.

Because people can make choices collectively and that affects all of us.

No man is an island. If people choose to engage in activities that end up affecting negatively the rest of us through externalities such as pollution, corruption, and the destruction of economic value, sorry, but historically people don't just stand by idly and let others destroy the societies they've built.

How is people buying tether and getting screwed related to you? What is the externality they are imposing on you?

Also even if that were true, it would show something else: the entitlement of doing something unto others to your own benefit. Isnt that always the reason to apply force?

It's related in that those phenomena can cause an economic crash and the the losses of bad investments affect families, dependents, and the long-term health of societies.

Even the most stringent and controlled economies can prevent crashes. Thats not what the SEC does as a purpose or as a result. Let alone in this space.

Bitcoin is entering another stage now where its resistance to this will be tested, hard.

The SEC has instilled a level of trust in the financial markets that has enabled humanity’s most spectacular century. Why is that a problem?

The magical "beat the man" ethos is now gone, some dystopian bureaucracy allusion, the ride's ending, prohibition is over

Or in spite of it.

This is a startup website, where thousands of software engineers get paid in lottery tickets that are not regulated, because they cannot sell the lottery tickets (THAT is regulated).

There has been nominally more money coming in to ICO's which are terrible investments than startups in the bay area. Thats how bad SEC regulations are: all that money could have gone to way more promising ventures, but it cant because it is blocked.

There is no problem if you want that level of protection, but rich people dont have it and profit from not having it. You go pay your poor mans tax and let the people that don't want to pay it roam free.

It’s an experiment that is repeated time and time again, and people refuse to learn.

Without the disincentive of prison and financial ruin, people will always find ways to use leverage and information asymmetry to defraud the public. Always.

HN is often very innocent and naive about people and their motivations. Unfortunately, there are assholes in this world, and the law is what protects us from them.

What the law does is transfer the power to defraud the public from the common grifter to a central authority. In doing so, it adds another, more sinister tool to the ones you mention: forced participation.

Your overestimating the financial intelligence of the average person. Think about the billions people waste on actual pyramid schemes. These are the same types of people who will be screwed over the most by a cryptocurrency crash. Is a slightly more efficient cryptocurrency market really worth the hardship of thousands of people?

Either (most) people are stupid and they need to be protected for their own good - in which case we have the problem that the same people are nevertheless somehow capable to democratically choose their representatives. Or (most) people are fine taking more risks than you would like them to, and - because you believe you know better - you want to prevent them from doing so.

Sure, you also have bernie madoff that made the biggest heist in history under the alledged supervision of the SEC.

Or worse, the 2008 bailouts, which were the equivalent of today the US government saying they will buy all the tethers on parity from bitfinex so their insolvency doesnt affect the market. I say let the chips fall where they may. If bitfinex is insolvent it should go down, and the lawsuits on fraud should put the people in charge in jail. Nothing else needed.

> but if you create the expectation that the sec will protect you as a consumer from the scams, then we will not be sophisticated to actually organically ignore scams.

Why have laws at all if you're unwilling to enforce them?

Why have a gun if you are unwilling to pull the trigger, amirite.

I wish people would find organic solutions, but history shows that people reliably fall for the same scams over and over and over again. Gambling is one of the oldest economic activities and remains as profitable as ever.

I've been shocked before at how little due diligence large investors sometimes do, especially when a mania is in effect. These are professionals whose job it is to invest wisely. What do you think the average person who is ignorant of the depth and complexity of finance is going to do? Are they even qualified to evaluate complex financial products?

"They" or "We"?

I fail to see the need for such "experimentation" considering that this has all happened before, and those lessons were learned.

That, and generally those who advocate that something should "take a hit" are usually not the ones who are going to be harmed by it.

I would argue the exact opposite, the ones that propose regulation are often benefited by it. For example, who could benefit from regulation of bitfinex?

You? Or Coinbase?

Both. Unless you are trying to insinuate that having protection against obvious scams is a bad and selfish thing.

Are you asking the protections for yourself or the protections for other people?

Because i never asked for the SEC to protect me. We can live in a world with both. You have coinbase with way more backing that bitfinex, and people still choose bitfinex. Let people choose, and if they mess up they mess up.

Yeah, no. Again, you're arguing for the "freedom" to scam people. Not gonna happen.

And you don't live in isolation; you are not an island. Those people that get scammed? They're not going to do so in isolation. That's going to have a ripple effect on the rest of society.

coinbase already FDIC insures USD holdings, and 3rd party insures crypto holdings.

risk variability is already organically controllable, and can be observed in the disparity of price movement between different exchanges (gdax is always lagged/dampened)

> coinbase already FDIC insures USD holdings

Which is totally irrelevant to the cryptocurrency.

> 3rd party insures crypto holdings.

Yes, approximately 2% of their crypto holdings, so effectively nothing from the perspective of a customer who loses funds if their cold wallets are attacked.

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