Beware the Dangers of Crypto Regulation
With so many unknowns and the risks of contagion mostly contained, the best policy right now is caution.
Naming rights will remain unregulated.
Photographer: Joe Raedle/Getty Images North AmericaThe collapse of FTX and the charges against Sam Bankman-Fried have brought many renewed calls for crypto regulation, from both commentators and legislators. That is precisely why this is a time for caution. No matter how strong the temptation, we should not overregulate.
Begin with two central facts. First, there are numerous ways for small and large investors to lose their money, including by investing in risky equities. Regulating crypto won’t end that danger. Second, despite being one of the largest financial frauds in history, FTX has not created systemic financial risk, which should be the main concern of regulators. And market forces already have made the risk from crypto much smaller: At the peak of crypto values in late 2021, crypto assets had a total value of about $2 trillion; as of this writing, that figure is about $845 billion.