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[flagged] Christine Lagarde Says Crypto “Worth Nothing” & Should Be Regulated (cryptolka.com)
28 points by MayurReply on May 23, 2022 | hide | past | favorite | 132 comments



Love the irony of this coming from a manager of a fiat currency bank: “My very humble assessment is that it is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety,” she said.


This is the old gold bug argument, but really... is gold actually worth anything? You can't eat it. You can't cure a disease with it. You can't live in it. It's only really worth anything if you're making electronics or doing certain kinds of chemistry or materials. It only has value as 'money' because people have agreed that it does, just like any other monetary unit.

In a "prepper" type disaster scenario things like farm land, ammunition, antibiotics, or specialized survival skills would be worth far more than gold.


This 'money is just an agreement or a common belief' is a fallacy. Gold is scarce, divisible, verifiable, resilient, etc. It simply has good inherent properties to work as money, as a store of value and as a medium of exchange. No one decided or agreed to use gold as money. It just emerged in a free market as the best money, because of those properties. Same goes for bitcoin.


Isn't "emerging in a free market as the best money" equivalent to a bunch of people collectively deciding/agreeing to use it as money?


There's no communication needed among those people, so it isn't a decision or agreement in that sense. Thousands of years ago, each person individually found out that the gold they have been collecting is still as valuable as a year or 10 years ago, when used in barter. It was pure chance and survival first, and later it became a rational choice. This happens inevitably, because gold is very hard to produce, and it's very hard to destroy or consume. I.e. its inherent monetary inflation is lowest, compared to anything else. Those who collected sea shells or stones, found out that they lose value over time, and that's because they are easy to find and they are easily destroyed.

Next, people started increasingly accepting gold in trade, just by their individual decision. Because of this, it made sense to try to obtain it yourself to take part in the economy. When the demand grows for gold as a monetary good, it becomes even more valuable, and therefore even more rational to save and use in trade, and at the same time demand for other types of money diminishes. At this point, the network effect is so strong that it becomes obvious to everyone that gold is money, i.e. it is the most wanted good in the market. That's also why money tends to converge into one, when there are no regional regulations or controls around money.

Historically, gold has become money independently in many parts of the world. It has been money for thousands of years, and in many forms. King Croesus was probably the first who minted standard-weight gold coins, to make it easier to transact with.


Never understood this counter argument. It sounds like "oh you think crypto is based on nothing? well it's true, but you're a hypocrite because you also use something based on nothing."

Is it supposed to convince people to adopt it or else they are hypocrites? When has that ever worked?


It's not really a counter argument, its just a delightfully ironic statement.

But it does reveal to people that "value" is a human construct. A central bank can create infinite money out of thin air, but we never stop to think about that.


> A central bank can create infinite money out of thin air, but we never stop to think about that.

But central bankers think about it on a daily basis. Christine Lagarde has certainly paid a lot of attention to whether the amount of money the system demands is about right or whether an interest rate rise is needed to stop the economy overheating, whether there's enough liquidity and financial control the commercial banking system the central bank feeds into, what the change in the shape of a bond yield curve says about investors longer term expectations of for money, and what the side effects of all this money coming in is on the rest of the economy, and whether a particular downturn is better ameliorated by fiscal policy. Thinking about this is literally why her job exists.

People LOLing at "fiat" currency coming from nothing whilst rushing to buy the newest token invented from nothing (as a wealth generation exercise for its creators) that isn't supported by monetary policy (or redeemable as legal tender), not so much.


>But central bankers think about it on a daily basis.

Yes, and it is them we have to thank for the massive inflation too. So either they want the highest inflation in 40 years, or they are inept.


It's also them you have to thank for 40 years of not having massive inflation, which was a pretty regular thing in earlier times.

(And yes, they absolutely do prefer the high inflation outcome from a fuel supply shock following a COVID shock to the raise interest rates and crash the global economy like 2008 outcome. That much is a policy choice)


Why does middle class wealth destroying inflation go hand in hand with fractional reserve banking?


It doesn't. Developed countries had more periods of 9% inflation in metallic standard eras and the middle classes have long avoided holding the majority of their wealth as cash.


>but we never stop to think about that.

Why do you think people don't know about it or haven't thought about it? Is there some predicted outcome in the world—that is absent—that suggests that people don't know that "value" is a human construct?


It takes a lot of time and education to understand the necessary parts. A bit of economics, a bit of history, a bit of social psychology.

Most people are living their lives day to day, and never stop to think about what money is. We just use it, and never stop to think about why paper bills are worth anything (or that our entire networths are basically digits in a MySQL database these days).


Let me make my question more clear: You're assuming people have never thought about it, and I'm asking why you believe that they have never thought about it.


I'm assuming because the average person is a day laborer repeating physical tasks. Their biggest concern is having enough money to survive for the month.

I supposed I could be wrong and that my taxi driver is indeed well informed about the nuances of monetary policy and monetary history.


>I supposed I could be wrong and that my taxi driver is indeed well informed about the nuances of monetary policy and monetary history.

Why are you strawmanning my argument? I didn't ask if you believe your average person knows "the nuances of monetary policy", I asked why you believe people haven't thought about "value" being a human construct.

Everyone I've talked to about the subject acknowledges that they've thought about it before. Some go as far as to roll their eyes, like "oh great, this conversation again" because it's so played out. So I think you're seriously underestimating who hasn't heard of these ideas.

Go ahead, ask your next uber driver why money has value, and see if the response isn't something along the lines of "because people believe it has value." It's not a difficult concept only understood by experts.


> But it does reveal to people that "value" is a human construct. A central bank can create infinite money out of thin air, but we never stop to think about that.

This is not where money comes from.


What Is a Central Bank?

A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.

https://www.investopedia.com/terms/c/centralbank.asp


The point I was making is not that the central banks don't 'create money' per se (they create some kinds of money, bank reserves to be precise), but that in a modern, fractional-reserve banking system, the money supply itself is created not by the central banks but rather by retail banks. When you borrow money to buy a house for instance, that's the point at which money is created.

Money isn't pushed into the economy. Money is pulled when loans are taken out, from retail institutions. These loans are constantly repaid meaning that the money supply is controlled by the quantity of origination of loans and the rate of repayment of existing loans. The Fed controls the circulating supply by adjusting the demand for new debt, by setting interest rates.

Generally even QE, the Fed creates reserves and swaps them for liquid assets like treasuries. These reserves then collateralize additional lending. [1]

[1] https://www.forbes.com/advisor/investing/quantitative-easing...


It’s not supposed to convince them, it’s just correcting a false premise.


And she is right. The price of Euro or USD or RMB (or whatever Fiat currency represent their people) can never be 0. This is in stark contrast with crypto that can definitely go to 0 with double precision accuracy.


Have you not heard of the countless fiat currencies that hyperinflated out of existence?

Just because you haven't lived long enough to see a major empire fall doesn't mean it won't happen eventually.


If China prints 100x RMB tonight will you stop buying their services or products? No. You will keep injecting their economy with whatever valuable asset you have to get your stuff.

Inflation is just a symptom not the cause of an economic collapse.

If inflation is also something that is everyone's problem then my thesis is that it is nobody's problem.


You're missing the part where people abandon the RMB as a store of value and Chinese bonds become worth nothing.

They become worth nothing because people realize the central bank will inflate away the future value of any RMB, and thus holding RMB or any asset that derives value from future RMB (including stocks in businesses whose revenue or dividends are in RMB) become worth nothing.

Good money is supposed to be a good store of value as well. If RMB cannot store value, people will not use it. If people do not use it, it becomes worthless.


That is the nice thing about government. They can enforce things.

So even if you don't want RMB if the government pays you with RMB then you take it. That means that banks, contractors, employees etc all get RMB.

Government can also force trade parties to trade with its own currency, like Russia does today.


Didn't seem to work out for Zimbabwe, Hungary, Venezuela, etc.


For failed states why do you have the expectation that their currency (Fiat or otherwise) will not collapse?

Venezuela was stripped of its manufacturing capabilities with the exit of foreign investment due to sanctions. Their former petroeconomy now is worth nothing.

The intrinsic value of their currency is lost, as the Venezuelan gdp in absolute terms disappeared.

Currency exchange rates is the least of their problems.

They are out of value. Not out of valuable cash.


If crypto goes to a tiny fraction of a cent then I will buy all of it. Since I will never sell it for zero then it can never go to zero.


If there is no liquidity, then it can go to zero since you can't find anyone to sell it to.


Thing is that you will always want to buy something from China or EU (unless their people and resources disappear).

Example: We imposed strict sanctions to Russia that almost cut any trade with them. Is the Russian currency valued at 0? Of course not. Because Europeans, Indians, Chinese are buying Russian currency to pay for Russian natural gas / oil.


It is because the US didn't close all the loopholes and because foreign countries have to buy energy in rubles... ie: heavily manipulated currency.

https://www.npr.org/sections/money/2022/04/05/1090920442/how...


See? Regardless of the policy their currency cannot go to 0 because it has an intrinsic value backing it. The resources and the people of the Russian Federation.


I get your point, but I see it more like the government can continue to force people to make the currency valuable by requiring payment in rubles. Hence the manipulation.

If you got rid of the government, the value of the currency might still go to zero, while the intrinsic value of the resources could still be worth something paid in another currency.


Of course the organization of people under a single entity is what gives them bargaining power.

If there was no Russian government and army then you would just go in and take whatever resources you like at the cost of maybe a couple of bullets.


Not quite. Zero for a trading asset is a price below a tick. So if it's trading for 0.005 but the tick size is 0.01, then it rounds to zero. This will likely happen to Luna soon in spite of many folks having actual LUNA tokens.


Who cares about ticks when it’s two people trading with each other? If there is a liquid market I’d imagine they’d readjust the tick size to serve whatever market remains?


If the value is less than transaction costs, it is worth 0.


Untrue. You can buy 1 shitcoin for less than the transaction cost and it is still "worth" what you paid for it. More accurately, it is "worth" what someone else will pay you for it.

Transaction costs are not a factor in the worth of the asset.


I have a $100 TRILLION Zimbabwe note in my wallet that says otherwise.


Absolutely. We shouldn't listen to anyone with a checks notes understanding of economics when determining whether this economic implement has economic value.

[edit] I'm sure they're just waiting for their fiat shill check form Soros.

[edit] Just a quick side-note: you do know that "fiat banks" (a hilarious term btw) don't care what you keep in them right? BNY Mellon and Fidelity are more than happy to custody your future of finance for you so it doesn't get lost in a boating accident. These people are far less zealous than you seem to imply. How about we avoid ad hominems?


I believe that that’s an inaccurate and uncharitable characterization of the comment you’re responding to.

If the linked article contained anything other than a brief offhand remark by Lagarde (as quoted by the OP), it would be reasonable to address her argument in greater depth.

As it is, the sole reason this is even being discussed is due to the authority she wields. It is therefore reasonable to address that authority instead.

The OP posits that a person whose authority is potentially threatened by a technology might not necessarily be an impartial judge of said technology. You might agree or disagree, but you’re not really responding to the argument. And you’re the only one bringing up conspiracy theories.


>[edit] I'm sure they're just waiting for their fiat shill check form Soros.

Is it irony right? Because your second edit seems more serious and end with 'How about we avoid ad hominems?'

Irony is hard on the internet.


All they did was quote her and say it was ironic since fiat currencies are also not backed by hard assets. I think you are having an over reaction and hallucinating things to be upset about.


Not being backed by 'hard assets' is not the same thing as being backed by 'nothing.'

Generally this belies a serious lack of understanding of where money comes from and where it derives its value.

If I go to the bank, and borrow money for a house in the form of a mortgage, then new money is created. An obligation to repay that money is also created. That obligation to repay is collateralized by my house. In this case, the new money that was created was in fact backed by hard assets.

More generally the value of money is derived from an obligation to repay the debt that created it, and the legal system and framework which enforces it.


That's a loan being back by a hard asset, not the actual currency.

If you have a stack of 100 dollar bills, where do you take them? What debt are you repaying or what can you exchange them for?

I think you are diverting from having such a hyperbolic reaction to someone else's comment. They pointed something out and you launched into some sort of conspiracy nonsense that they didn't say.


Sorry but I know based on our previous interactions you've no interest in engaging in good faith so I'm going to leave this conversation here. You're welcome to DYOR on how the monetary system works.


Seems like projection when you can always just confront what I'm saying. I didn't write much, but you are just avoiding it and restating part of what you said before.

Also do you realize you are accusing people of "bad faith" when you replied to someone and said "I'm sure they're just waiting for their fiat shill check form Soros.".


“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”


I know that's in reference to the UK, and I don't know how their bailout system worked, but I know how the US one worked. These loans were repaid in full and generated a $110B profit for the US government. [1]

[edit] Note also that the US bailouts weren't monetary policy, but fiscal policy. They were administered by Treasury, not by the Federal Reserve.

Now do the Wormhole bailout by Jump lol.

[1] https://projects.propublica.org/bailout/


That is the message encoded in the first bitcoin block.


What's ironic? The collapse of the Bretton-Woods system and the gold standard are well documented and it has been widely recognized as a good thing by everyone except for gold-bug cryptocurrency enthusiasts. For reasons they continue to assert that a currency must be backed by a "hard asset", ie: gold.

All I think it demonstrates is how little these advocates seem to understand economics and banking.


Fiat currency is worth nothing but cryptocurrencies carry a huge cost to the environment and energy independence. Crypto is arguably worth negative.


> cryptocurrencies carry a huge cost to the environment and energy independence

"whatabout" traditional banking?


As far a I know there is no reward in traditional banking to whoever can waste the more energy doing useless computation (creating a wasting race). It's probably not great, but at least it's not completely stupid.


They're not designed to maximise consumption of energy priced below expected yield from burning it, and are thus several orders of magnitude less harmful to the environment on a per transaction basis, and probably less harmful overall.


Expended energy per transaction basis is a popular misconception based on a misunderstanding of how PoW works in practice.


Nope. It's a popular misconception that people think burning more energy than a mid-sized country to maintain a rounding error in the world's finances with pathetic transaction throughput is unacceptable only because we don't realise the energy use isn't strictly proportional to the transaction throughput.

But it doesn't, it just requires acknowledging that crypto is burning more energy than most countries for a comparatively tiny number of people to gamble a comparatively tiny amount of wealth, and that the actual incentive structure of PoW (probability of block rewards based on consuming more energy than rivals) is the most wantonly environmentally destructive technology invented in a history which also includes leaded petrol and CFCs.


Nice rant.


You have the entire government bureaucracy and military as an externality for fiat currencies if you absolutely insist on viewing it through that lens.


It's not ironic, the underlying asset in a fiat currency is the trust in the system and currency itself. While this might seem like nothing, it is in fact quite tangible and valuable. Crypto, being very new relative to fiat currency, does not have the inbuilt trust and stability that fiat does, with decades or in some cases hundreds of years of history to back it up. This is intuitively verifiable with a simple thought experiment - if someone offered the average person $1,000,000 in cash or an equivalent value of ETH, which one would most people choose?


She also said that her son owns cryptocurrency, "because he's a free man." I think it's quite an odd remark for a person in her position. The whole thing could be interpreted in a way that she has to be officially against bitcoin, but she also wants to signal that maybe bitcoin is a good idea too, given a free choice.


Why is that an odd remark? She’s not a fan, but she’s acknowledging her son has holdings, as he is his own person. Is she supposed to control what her (presumably adult) son spends his money on or invests in?

I think most coins are Ponzi schemes. I still have a very small investment in a few coins, because why not. I was dumb and didn’t get out when I had a 4x return, but it honestly isn’t enough money to matter to me in the slightest. I also think this is an area that should be regulated in some way (or at the very least, the large exchanges should be regulated), because too many people are going to lose too much money, but I don’t think crypto should be illegal or anything.

I just don’t see the problem with her acknowledging that she knows people who have holdings but also that she doesn’t see the real value basis and thinks it is a space that should be regulated.


No, it's clearly a coded message to her crypto bro minions for them to hodlr. Open your eyes man!


Well, she leaves the reader to question: which one of them is smarter, the mom or the son. She clearly (or officially) doesn't understand money and subjective value, which implies that her son is the smarter one.


> She clearly (or officially) doesn't understand money and subjective value

I can only assume you don't know who Christine Lagarde is because to suggest she doesn't understand money is not only ridiculous but bordering on offensive. Here is her wikipedia page: https://en.wikipedia.org/wiki/Christine_Lagarde

To say Lagarde doesn't understand money is like saying Paul Graham doesn't understand startups. It's absurd on its face. You may disagree with their philosophy but there's absolutely no denying their deep understanding of their respective subject matters.


That's exactly what I mean. If she indeed does understand money, why does she say that 'bitcoin is worthless, it's based on nothing'? It's quite clear to me that she says that only because it's her duty, and that's why she mentions her son, who is free to choose.


I would interpret that remark to mean more than "Yes, I'm the president of the ECB, and my son is free to make his own choices, even if I regard them as stupid ones."


It'd be far more normal to read it as:

'I'm going to let my child make his own mistakes, despite my view that it's a stupid idea'


Interesting- I had interpreted it as "he's free [to make his own decisions ... and mistakes]". Who knows (I don't!) what she actually meant


What s the implication, that those who don't own are not free?


She is trying to say that don't listen to me, listen to my son. She is not free herself, because she has to defend the ECB and the euro. She implies, by using his son as an example, that ECB and the euro can't compete with bitcoin in a free market.


This is not at all a reasonable interpretation of what she's saying.


It's quite reasonable. Otherwise, she wouldn't mention him at all. She wanted to signal that 'son of the president of ECB owns bitcoin'. It's open to interpretation.


It has to be asked: if crypto is "worth nothing" then why should it be regulated?


The space relies on obfuscation in technical and financial complexity to lure in folks who don't know better. This dynamic is causing significant harm to individuals, and meaningful misallocation of capital within the economy.

It's a bottle imp. [1] While it is fundamentally worthless, it relies on irrationality to create price in lieu.

[1] https://en.wikipedia.org/wiki/The_Bottle_Imp


Are only things with worth regulated? Pyramid and Ponzi schemes are worth nothing and are regulated.


Are they regulated or are they illegal? Such schemes have negative worth as they actively harm people.


If they operate in regulated markets, then the regulations thereof determine their legality.

A ponzi scheme in itself isnt illegal (which is why there are so many crypto ponzi schemes) - it is when it is considered securities fraud that it becomes illegal.

The thought is that by regulating cryptocurrencies (i.e. treating it as a similar asset class as stocks, commodities, etc), such "investments" would be subject to the same rules - whether it has any real inherent value or not is irrelevant.


Ponzi and pyramid schemes are illegal in many jurisdictions. It's possible to be charged with securities or commodities fraud for security-based ponzi schemes, but there are laws against such schemes outside of the securities market. E.g. https://www.azleg.gov/viewdocument/?docName=https://www.azle...


I didnt mention pyramid schemes specifically because there are (usually) other laws that deal wit those (as you have pointed out). They dont apply because the very definition requires the product to NOT be what you are purchasing. When it is the nature of the product that matters, it is the respective regulation that applies. Crypto has no regulation, hence the desire to treat it as another regulated asset class, so the existing laws apply to it.


Serious question: Do you think no people have been harmed by crypto? My guess is by the end, 10s of thousands of people will have been seriously financially harmed.


Netflix has fallen more than Bitcoin has this year. Netflix has no or very little in the way of underlying physical assets to back up their valuation -- they do have intellectual property that may or may not be worth something, but is not an intrinsically scarce good like, say, real estate or even like iPhones.

So, serious question for people who argue that Bitcoin deserves a special class of regulation: what differentiates Bitcoin and Netflix here?


One big difference is that Netflix is subject to securities regulations and must file regular reports with the federal government providing important information about how they have been making their money, how they plan to make their money in the future, and any potential issues they see on the horizon with their business plan. Major investors are disclosed. Names of managers are disclosed. And every potential investor can read these reports; they are public. If they lie, investors can sue.

I don't think Bitcoin has anything like that - its ledger is public, yes. But the important part, where fiat currency is turned into Bitcoin or vice versa... that is opaque, for the most part. This is a very big difference, in my mind.


Investors can sue if Netflix lies, though importantly if what you're worried about is a collapse in the value of the security, um... bad news. Suing is not going to recover the value of the security.

I don't think that Netflix itself has a responsibility to report the flow of fiat currency into and out of Netflix, certainly not in a timely enough way to prevent people from being burned by the outflow of capital from it (as, indeed, has happened this year). The stock exchanges themselves provide visibility into that.


Right, but if I'm sitting in the chair as a regulator whose goal is to reduce the harm that financial products can cause to an average member of the general public while still allowing the market to work on its own as much as possible... I'm going to look at Netflix and think "well, we did what we could." Do you honestly think I should look at Bitcoin and think the same?


I mean? Maybe? Bitcoin has generated more wealth for more people than Netflix and lost less value from its peak? Seems like things are going okay?

You seem to be hinting that there's a natural limit to what we "can" do for any given security. I don't think that's true: it's just all tradeoffs. Could a regulator have tried to stem the losses people experienced from Netflix? I mean, sure. They could've halted trading on Netflix. They could've artificially bought up Netflix's stock.

I don't think they should have done all that. The costs would have been extreme. But if you're all in on, "we did what we could," then I think the ball's in your court to describe exactly where the limits of that doctrine lie.


40% of bitcoin holders are underwater, and the vast majority of that so-called wealth is held by like 5 people. And for what? being in the right anarcocapitalist forum in 2009? Nice.


What percentage of Netflix holders are underwater?

That's the point of this whole thread: whenever you get crypto haters on these fora, they act like crypto is the only volatile asset that has no effective price floor. But in fact, there are loooooooooooots of assets that are volatile and have no effective price floor.

Are those assets dangerous to invest in? They sure are. I don't invest in crypto and I don't invest in Netflix, either.

But do those many other assets that are volatile and have no effective price floor draw all this apocalyptic talk and complaints? No, they don't. They may draw entirely reasonable discussions of the value of not investing all your eggs in one basket. Which suggests to me that all the hate that crypto draws is not in fact because they're volatile and have no price floor -- that's a smokescreen for people who, generally, are in some combination of: a. don't like the politics of some people involved in crypto, or b. are pissed off that they spent a decade saying that crypt was going to crash any day now and have been consistently wrong.


People have definitely been harmed by crypto. I was pointing out that pyramid and ponzi schemes harm people by definition. There is no mathematical way for them to benefit a majority of participants. That doesn't necessarily hold for crypto.


How not? The problem with pyramid schemes, gambling, ponzi schemes, and cryptocurrencies is: they're zero-sum games (or worse). As you say, there is no mathematical way for most people to benefit from cryptocurrencies.


Cryptocurrencies are not zero-sum due to the ability to create money via lending. E.g. if I make a currency with 100 tokens, I can lend them to you for a year at a 10% interest rate. Even though there are only 100 coins in existence, I’ve created an asset worth 110 coins. This is how money gets created in a fiat system created money as well. See https://en.m.wikipedia.org/wiki/Money_creation


The reason money creation is valuable in fiat currencies is because those are circular economies: the person taking on debt is presumably producing something of value, and able to pay back the interest.

Crypto is not a circular economy. It's a speculative investment whose expected return is always negative.


How is taking a crypto loan and using it to produce something "of value" in the U.S. different than someone taking a USD loan and using it to produce something of value in Turkey?


Let me be more clear: the value in money creation is the loan itself. Money creation in USD does not make the USD more valuable. It makes the economic output of the economic system (GDP) more valuable.

The point remains: someone spending $USD to acquire $<Crypto> should expect to lose $USD when they invariably want to sell their tokens for $USD later. Casino chips are also a negative-sum game, even though a loan shark may loan you some for interest.


Casino chips are a good example. It's the casino that is zero-sum, not the chips themselves. People don't do business in casino chips because of logistic and liquidity issues. If you could buy casino chips digitally from anywhere in the world, at any time, with no counter party risk, and write contracts against them, then I bet a lot of people would do so.


According to https://web3isgoinggreat.com we're at about $70M lost to fraud, scams, and hacks this month alone. It's not a full accounting but it's a small baseline. It's safe to assume it's probably larger.

Governments and regulators are worried about it because when enough people invest their life savings in crypto, and it disappears, that's real capital that is gone from the existing banking system. Fractional reserve banking enables banks to use money they hold in deposits to fund large projects, loans, and invest (with plenty of regulation about how much money they must hold in reserve to ensure customers can always withdraw their funds).

If enough people lose their shirts then it starts to have serious effects on an economy.


>According to https://web3isgoinggreat.com we're at about $70M lost to fraud, scams, and hacks this month alone. It's not a full accounting but it's a small baseline. It's safe to assume it's probably larger.

How big is the fraud number for USD or Euros? Billions per month?


Your problem is you're comparing unregulated securities to a currency. Try comparing it to regulated securities. Then look at volumes. Then check for enforcement action. The SEC regularly (maybe not regularly enough, but regularly) torpedoes these frauds in the real markets.

I'm sorry but it's asinine to compare securities and currencies, and straight-up whataboutism.


Update: it's probably a lot more than $70M: https://web3isgoinggreat.com/?id=ftc-reports-329-million-los...


The IRS says crypto is not a security: https://www.irs.gov/businesses/small-businesses-self-employe...

You can create security instruments out of crypto, but that is not the same thing.


Is your argument that someone else is pulling off bigger frauds so this fraud should be overlooked?


No, my argument is that the ability to commit fraud with crypto is not in any way a legit criticism against it. There are actual criticism, fraud isn't one of them.


In the context of the question, “why should we regulate this,” it’s a legitimate reason.

Banking is regulated to prevent these sorts of things. Crypto is designed to enable them. They need to be regulated.


Bitcoin is far easier to monitor than cash, so that doesn't hold water. And Monero may be great for avoiding oversight, but it's barely used by anybody.

I think as usual government just wants another thing to tax and control.


Is it? Is that way there are money-laundering-as-a-service systems out there? Can I do the same thing with cash?

What Lagarde is saying is that this stuff needs to be regulated before too many people lose their shirts. So far these "crypto assets" have demonstrated no value. Many folks are dumping their life savings into these schemes and losing everything. If enough people lose everything houses foreclose, debts go unpaid, inflation goes up.

The same thing was done every time the grifters tried it in traditional currencies. Too many people lost their shirts, government stepped in, we changed the rules and added regulation, and people get better protection. The crypto space is speed-running through all of these scams. What they're doing isn't new, it's all been done before.


Because it is being marketed as being worth something


Who is doing that?


Matt Damon, for one.

Kim Kardashian and Floyd Maywether are being sued for shilling Ethereum Max (lol) [1]

Quentin Tarantino for NFTs re Pulp Fiction.

Jake Paul of course, with his Dink Doinks.

Nick Carter, Ben Phillips, Soulja Boy and Lil Yachty re: Safemoon.

Need I go on?

[1] https://www.cnbc.com/2022/01/12/kim-kardashian-and-floyd-may...


So what is your realistic alternative then? Make it all go away? Ban all of it, 100% guaranteed?


My solution is to ban the exchange of fiat for crypto.


So why wasn't these crypto exchanges who facilitate in the 'exchange of fiat for crypto' or these on-ramps banned along time ago then?

We both know that banning all of them is not going to happen. Is that why instead of that, they are putting in AML, KYC, etc regulations and more for these crypto exchanges?



"Crypto assets are ‘worth nothing,’ says ECB’s Christine Lagarde"

https://news.ycombinator.com/item?id=31476551


Ok, then don't tax it if its value is zero.


I don't think you are taxed on your cryptocurrency holdings. You are taxed when you realize the gains by selling them for USD, for example. Same as stocks, right?


Correct, in most jurisdictions I'm aware of. I was just being facetious :)


Value is much harder to determine, so governments usually just tax (realized) capital gains instead.


We could call it the "Seinfeld Regulations" - regulations about something supposedly worth nothing now warrant the spending of something supposedly worth something to enable potentially violent enforcement.


Because people start running to the institutions they didn't want to be regulated by the moment they get scammed.

Of the countless of millions of dollars lost in crypto the first sentence in every statement reads "we've contacted the federal authorities and are trying to get your money back". Why isn't it "code is law suckers, you know what you signed up for"?

In this people act like children, when they get scammed they don't blame the scammers or themselves, they blame and put strain on the resources of the people who warned them.


We already have rules making it illegal to scam.


If those worthnothings are causing people to lose real money they will get upset against their own government so maybe yes we should do exactly that. Even selling the Brooklyn bridge was regulated if not straight out outlawed.


Crypto has enabled me to play online poker in a country where its illegal.

Outside of enabling illegal activity, scams, money laundering, etc. crypto is useless.

But I will say, as a fan of poker I am grateful.


Perhaps we should make a real Bitcoin army to enforce the value like fiat haha. Neckbeards unite! Mod your drones! Just kidding of course, can't stop Bitcoin.


It clearly is worth nothing to her, because she cannot debase it. All that's left is to berate...


If it is "worth nothing", then why regulate it?

Baseball cards are worth essentially nothing, yet I do not see international powerbrokers of questionable democratic lineage promoting baseball card regulation.


Scale, mostly. I don't remember a 40 billion dollar market in baseball cards evaporating overnight once it was discovered to be a giant ponzi scheme.


You know what's entertaining though is that a lot of the very large funds that were rekt in the UST failure were filled with people who come from traditional finance. It wasn't just small investors with 40 billion dollars. You'd think they "knew" better...


Yep, it's kind of crazy. I know a couple personally.


#metoo


We did see that with the beanie baby boom of the mid-1990s, which in fact is probably more comparable to the ape thing. I don't remember Beanie Baby regulation.


Worth is based on scarcity, need and agreement in peculiar ways. Some people can agree to trade an asset while some don't. Before fiat, it was fiat pegged to the dollar, fiat supported by gold, gold, silver, various metals. There was not enough silver to support the habits and economy of the British so even opium was used as a currency. And "we" switched to gold because there was not enough silver to support the economic growth (and then fiat). (And here is a random web write-up:https://www.abcbullion.com.au/investor-centre/blog/Silver-an....)

The real irony is when central banks try to make their own digital currencies, to more effectively try the past negative interest rate experiment among many other things like tracking. (Japan tried it as an interbank borrowing rate but had the opposite results.)(China is planning to do all that, and the Fed made a proposal here also -- unlikely to be taken seriously -- https://www.federalreserve.gov/central-bank-digital-currency....) The working theory to my understanding of such proposals is: "We shall qualm the thirst of the public for digital, and also have a more effective tool to price/change the scarcity and cost of having paper money directly bypassing the banks."

>"The day when we have the central bank digital currency, any digital euro, I will guarantee it," she said. "So the central bank will be behind it. I think that is vastly different from any of those things."

What Christine meant to say is she doesn't like it that a central bank is not involved, because it has implications for her job and IMF as a private lending institution if people can move money that easily.

She is not wrong though in her warning; it is a risky asset. Yet to that effect other stocks for instance have much higher volatility and have been shorted to death. Bonds and gold have/had plummeted at various occasions despite that. And diversifying is almost impossible -- e.g. some hedge funds while having perfectly hedged were doomed as Lehman went down taking their assets with it.

I think historically and using physics and economics we can assert only one think, that everything tends to have zero value in the end -- \lim \limits _{t\rightarrow \infty} value(t) = 0. In that effect she is right. (Empires will crumple, habits and attitudes shall change, and if not the sun will finish the job.)

P.S. Personally, the day central banks have a digital currency that is forced eventually is the day I call 1984 done. Central banks are always political beasts and tools.




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