Many cryptocurrency players need to grow

The other week brought a curious explosion of a section of the online cryptocurrency industry – those who spend a lot of time promoting their holdings as the only choice in an uncertain world and challenging people who have another point of view, even when, as with some I’ve seen, the doubters hold great expertise in areas of finance.

here’s how Reuters said so: “LBRY Inc, a blockchain publishing company accused by the United States Securities and Exchange Commission of selling unregistered securities, tweeted on Wednesday that it was ‘done to be nice’ and that it s would engage in ‘psychological warfare’ as she fought the lawsuit.”

It may be a little too hard as a story. The folks at LBRY seem convinced that the The SEC was unfair and unreasonably punitive.

And the “psychological warfare” was meant to be a joke about meeting the SEC sweaty and after eating garlic, though if you ask your lawyers if you could do it and they said no, was it that much of a joke?

In any case, trying to build a PR campaign under the cheers of your followers is a bad way to approach regulators. As journalist and CPA Francine McKenna has said, “Swagger is not a strategy.” As she notes, this hasn’t proven itself for several companies to date.

A lot of people in the crypto industry don’t seem to understand how regulation works, other than seeing it as a blockage of what they want, run by people who are slow to embrace anything new out of spite.

They are certainly slow due to the nature of regulation. The intent is to ensure predictable behavior that meets a standard in order to achieve a specific result. For the SEC, there is two main objectives. One is to secure the “long-term interests of Main Street investors, otherwise known as retail or consumer investors. These are the people who lack massive assets, expert help and other resources to protect their retirement funds.

(And even the so-called well-prepared can fall flat. While this isn’t crypto, think of the investment disaster that Theranos has been.)

The other main objective (there is a third which concerns the improvement of the analytical capacities of the agency, but which can remain aside for the moment) is to “[r]Recognize important developments and trends in our evolving capital markets and adjust our efforts to ensure that we allocate our resources effectively. The SEC needs to keep up with changing technology to understand how market regulation needs to change.

On the other hand, enthusiasts tend to view cryptocurrencies in two ways. One is an alternative decentralized financial system. They assume that if things go wrong with governments and the global economy – a reasonable concern given the Great Recession of 2008 – cryptocurrencies will allow people to continue buying and selling.

This point of view is not realistic because it does not take into account the interconnection and mutuality of all finances. If the world’s ability to support business transactions at all levels were supported, the interconnected vast majority that uses more traditional forms of finance would cause so much conflict and disruption that decentralized finance would have no chance of working, given its reliance on communications systems that are part of the world’s largest infrastructure.

Plus, it’s not like decentralized finance hasn’t been tried before with results that should also raise concerns. It was the way of much of the world for hundreds of years. Individuals, banks, and corporations would create their own currencies, causing so many problems that today’s regulated reality was the solution. No, they did not then have the communications and technical advantages available today, but the same human issues of trust, whether or not the currency would stay afloat, remain. Relying on cryptocurrency as an ordinary form of transaction means wild volatility that could lead to periods when no one could know what their holdings would be worth from one day to the next. Again, in different forms, this is already the historical reality.

The other view crypto proponents often take is that it is a true form of value holding and a terrific investment. The first part has to deal with volatility. It is in the latter case that the SEC steps in, and given some things that have happened in cryptocurrencies, the agency cannot assume that there are companies that could never go wrong.

People from one company or another are upset. It’s understandable, because they’re betting on the future, doing important work, and then finding themselves caught off guard by something that, frankly, should have been obvious in risk management planning. It wouldn’t be so surprising if lawyers and financial experts tried to tell them.

Getting angry is not the answer, nor are impatient expectations. No big system changes quickly, partly because of the vested interests of the people running it, of course, but more importantly, huge mechanisms cannot change overnight. It takes years and patience because the new version has to learn to cover all the bases of the old one.

This is the very substance of Edmund Burke’s version of conservatism. A greedy rush for change needed to better recognize the potential that an unsuccessful transition to a new form of order could lose the old, never realize the new, and leave chaos in its wake.

Truly changing the world in fundamental ways is a process. If you can’t recognize that big change requires intention and pressure, yes, but also the reality of a process, maybe you shouldn’t be leading the charge because you don’t have yet reached the point of view of an adult.

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