Regulation – The Flaws & Necessary Adjustments

The Cries For Regulation

Before I dive into this edition, I want to cut right to the chase! The use of DEXs is a superior alternative to traditional centralized exchanges. Users do not part with their funds, and so maintain custody. During a trade, custody is lost momentarily, as the exchange is executed. The only risk that exists is within that brief moment, and if you make use of the “trick” which I published five months ago, you can fortify your funds even further. This involves having a “workhorse” wallet that is funded especially for trades. No other capital is held in the “workhorse” wallet but is merely financed to perform trades and engage with smart contracts. Outside of trades, this wallet remains empty.

The cries for regulation within the US are rather amusing, to be honest, as they are already regulated. Exchanges in the US cannot operate unless they adhere to regulatory protocols. This is exactly why FTX created FTX US, and why Americans are unable to utilize many alternative exchanges. The problem is, they don’t work. I know that in many parts of the world, regulators are generally clueless, and in many instances are trying to regulate something they don’t understand. You cannot effectively regulate something without an intricate understanding of it, and there appears to be a tremendous void in this particular area.

Furthermore, if FTX US is regulated, how did the proposed transactions take place? How can a regulated entity conduct unlawful practices under the watchdog’s eye? These are the questions that matter, and if regulation exists to protect the investor, that’s exactly what it should do. However, Bernie Madoff was also regulated, and he defrauded the public. It appears to me as if regulation is focused on the investors and not the entities, which, by default renders the motivation for regulation false.

“Investors Need Protection”

This is always given as the motivation and reasoning for regulation. I agree, investors do need to be protected. However, this reasoning has a massive hole, perhaps even more significant than the hole in FTX’s balance sheet. How do you protect investors by enforcing KYC and AML policies? These measures are focused on the users and not the entities. In actual fact, these policies appear to be more a case of gaining data and surveillance than for the concern of average citizens. This needs to change if regulators and governing bodies want to be taken seriously.

I can promise you now, individuals and entities who understand the regulatory space are smiling to themselves every time they hear the SEC and regulatory narrative being spun. The core issue is being ignored, while the “Big Brother” agenda is receiving all the attention. This does not protect investors. Investors don’t feel protected by the current regulatory framework, and rightfully so, as has just been proven valid by this entire ordeal.

There needs to be appropriate regulation of third-party Crypto companies, as well as oversight in regard to their daily transactions. Focusing on user credentials is not regulation. The fact that this entire ordeal exposes a lot more than the failings of SBF makes me think that he will get away with it. I hope that’s not the case. However, a verdict of guilt extends beyond SBF, and I don’t necessarily see that taking place.

Final Thoughts

Either way, these are merely my thoughts and not financial advice of any sort. One can only take it day by day, especially as an ordeal of this magnitude will require time to unwind. Further revelations will come to light as the story unfolds. Hopefully, significant “pressure” will force regulators to begin dealing with the real issue, the protection of investors.

Leave a Reply

%d bloggers like this: