It’s time to get serious about regulating cryptocurrency

This week I had the privilege of writing a guest column for Josh Barro's Substack while he was on vacation. Josh is one of my favorite writers and I highly recommend checking out his newsletter and associated podcast. He’s a great interviewer and a consistently independent and insightful writer about politics and policy. I’ve reproduced my guest column below.

Last February, comedian Larry David starred in a Super Bowl ad hawking the cryptocurrency exchange FTX. In a series of faux-historical scenes, David dismissed some of humanity’s greatest and most useful inventions—including the wheel (“I don’t think so”), coffee (“it’s awful,”), and the lightbulb (“it stinks”).

In the final scene, a man tells modern-day Larry David that FTX is a “safe and easy way to get into crypto.”

“Eh, I don’t think so,” David replies. “And I’m never wrong about this stuff.”

“Don’t be like Larry,” the commercial concludes. “Don’t miss out on the next big thing.”

“Larry” was vindicated last month when FTX filed for bankruptcy and admitted it had lost around $8 billion in customer deposits.

FTX’s campaign to get more people “into crypto” went far beyond Super Bowl ads. Last year, FTX bought naming rights to the stadium where the Miami Heat plays basketball for $135 million. FTX signed endorsement deals with famous athletes like Tom Brady and Steph Curry. And recently FTX CEO Sam Bankman-Fried has spent a lot of time in Washington lobbying for legislation to allow more widespread use of cryptocurrency in the US.

We now know that FTX was a bad way to “get into crypto,” but the larger question is whether ordinary Americans should be getting into crypto at all. Over the last decade, policymakers in the US and much of the world have taken a hands-off approach to cryptocurrency to avoid strangling a supposedly promising technology in its cradle. But cryptocurrency isn’t so new any more, and it doesn’t seem to be living up to the early hype.

In recent years a lot of people have “gotten into crypto” as a speculative investment, as a way to buy illicit drugs or to make ransomware payments. But we’re still waiting for truly mainstream uses like purchasing a cup of coffee.

And since that FTX Super Bowl ad aired, a lot of ordinary people have lost their investments in ways that US financial regulations are designed to prevent. Maybe it’s time for policymakers ...