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Libertarians need to do no such thing. There is room for regulated and non regulated (privacy) crypto. Crypto teaches people to take responsibility for their bad decisions and self reliance. There are winners and losers as in the real world. It's still too small to be resilient to bad projects failing like Celsius Luna or Haven. But its a WIP.

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Hi! Thank you for the comment! I understand the argument that getting scammed / losing money speculating can teach people to make better decisions and be self reliant. But I don't really want to live in a world that takes that as given and lets scams thrive as a result, as some people seem to want (not saying that's your view).

To me at least, it seems unecessary and wasteful to have a parallel financial system where everyone has to be on the lookout for scams when we could just ... get rid of them with better oversight and regulation, sparing people financial losses and freeing up time and bandwith for more productive activities than looking out for fishy products and projects. Again, thanks for reading and commenting :)

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Something that I didn't see you address, Frank, that I think is really important for this post and your comment -- crypto and traditional markets have different risk-reward tradeoffs and are trying to solve different problems. Crypto has fewer rules and as a result more experimentation and innovation occurs, but it is also riskier. Traditional finance has more rules, but less experimentation and innovation in exchange for more safety guarantees.

Isn't it a category error to say you don't like the downsides of crypto compared to traditional markets when they are pretty explicitly set up with different risk-reward mechanisms and different rules? A blockchain is a terrible tool for traditional finance. That make it "bad" or "good" intrinsically. They are tools for *different* jobs.

If crypto is too risky for you then you could just not participate, right?

"But I don't really want to live in a world that takes that as given and lets scams thrive as a result, as some people seem to want (not saying that's your view)." Others could say they don't want to live in a world that takes as a given regulation that prevents certain types of experimentation and innovation from occurring.

"To me at least, it seems unecessary and wasteful to have a parallel financial system where everyone has to be on the lookout for scams..." Others could say it seems unnecessarily burdensome to have one regulatory environment that treats people as being incapable of determining what level of risk is right for them.

"we could just ... get rid of them [scams] with better oversight and regulation." How would this happen in practice? How does a government regulate decentralized activities? Would it happen by limiting what their citizens can participate in legally? If you're effectively just centralizing everything, then why run a blockchain at all? For centralized, permissioned activities a blockchain is a horrible choice. It's a very slow, inefficient database for those applications. If you don't know and don't trust the other participants though, we have nothing better.

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Jun 16, 2022·edited Jun 16, 2022Author

Nick, these are great points. Thank you for such a thoughtful comment! I think your arguments link to a deeper debate about democracy and the kind of society we want to live in and the degree of experimentation we want to allow. These are important discussions that need to be had.

Ultimately, there is a tradeoff between experimentation and "safety" for retailers. The tradeoff is real, at some pareto frontier. At some inverted semicircle where more of one gives you less of the other. But, in my opinion, we are nowhere near that frontier. We can easily have the same degree of experimentation *while improving* guardrails for retail investors. I think we aren't anywhere near the point where one thing trades off against the other.

For example, I think it is possible to tell coinbase/binance/ftx/kraken etc, "look, in the US, you aren't allowed to sell tokens with these XXX characteristics," with XXX being a thing that is highly correlated with fraud and rug pulls (tiny mkt cap, illiquid, no whitepaper, zzz design, etc). Or, if you do sell those tokens, they must have a disclaimer that warns buyers loud and clear about the risks. Or, a message when you open the app that shows the % of retail that lose money. Etc. Really basic stuff to protect average joes.

Again thanks very much for reading and sparking this discussion. Going to tweet about it because it's very interesting. I really appreciate it!

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Thanks, Frank.

I personally want to live in a world that allows a lot of experimentation. Perhaps a lot more than you. I think fraud should be prosecuted, but recognize some perpetrators may be very difficult to find and bring to justice. I also think that no one should invest money in crypto that they aren't prepared to lose 100% of. Buyer beware should be top of mind for crypto investors. I support any exchange that educates their customers that way.

I think coming up with meaningful restrictions for retail customers that truly don't limit innovation and experimentation may be difficult. For example, don't nearly all tokens begin with a tiny market cap? What qualifies as tiny? What are the characteristics of a white paper that is good enough to allow listing the token? Things that protect investors also lock people out of opportunities.

A similar situation exists with respect to being an accredited investor. People who don't meet the income and net worth minimums are locked out of certain types of investments, no matter how savvy they are. Does that make sense?

I also wonder what problem this is solving. I haven't dug in very deep, but how many retail investors have been wiped out by this sell off? How many warnings did they *already* ignore? You know what they say about a fool and his money...

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Hi Frank. My name is Jackie Dent and I work for ABC Radio National in Sydney, Australia. I'm keen to have you on to discuss crypto on our show this coming weekend. Can you email me at dent.jackie AT abc.net.au. Thanks!

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