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Op-ed: Janet Yellen is just not getting it

US Treasury Secretary Janet Yellen has been calling for harsh oversight of cryptocurrency markets after the collapse of crypto exchange FTX, which . "The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets," Yellen said in a statement.

However, what the politician fails to understand that the failure of FTX was not related to any intrinsic characteristic of crypto, but due to what can only be seen as almost criminal behaviour – at the very minimum gross mismanagement – by Bankman-Fried. Moreover, the collapse of FTX is not evidence of the inherent insecurity and instability of defi any more

than the 2008 collapse of Lehman Brothers would be evidence of the inherent instability in the US economy. This was, fundamentally, a sell-off created by a bad business decision: investors looked at the dropping price and decided to cash out, causing the price to plummet in a comparatively short period of time.

Therefore, limiting crypto significantly is not be the solution - but oversight could be. Overview over unbacked crypto-assets, stablecoins, as well as the trading venues and the wallets where crypto-assets are held is most likely the way forward.

What does that mean in simpler terms? The United States is currently at a crucial turning point. Since nearly no regulations have been applied to the cryptocurrency business, it would seem that regulation is necessary; yet, excessive regulation is not the answer.

The FTX case shows that the absence of a proper set of rules made it difficult for law enforcement to apprehend criminals. Smart industry regulation will be essential to giving law enforcement the tools they need to combat the rogue elements that are present on the platforms without infringing on investors' rights or sabotaging legal companies.

The implementation of sensible regulation is also in the best interest of customers, as it should make the cryptocurrency industry a more secure and stable place without having to worry about the entanglements of unstable coins or rogue wallets.

Nevertheless, it is crucial that the government doesn't go too far with regulation and wreck the crypto market. The decentralised nature of cryptocurrencies is one of its greatest benefits, and it has attracted many novice investors. What Yellen is calling for would destroy this.


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