The SEC Cracks Down on Crypto: Find out the latest developments as the SEC takes a closer look at the cryptocurrency market. Stay informed and protect your investments.
The SEC Cracks Down on Crypto
Now, suppose you want to regulate this company. What do you do?
One option is to require the company to hold some amount of assets in reserve, as a guarantee to its customers.
You could require the company to keep, say, 10% of its customer funds in a bank account, or in some other easily-accessible form. But there’s a problem with this approach. What happens if the company goes bankrupt?
The customers would be out of luck, since the company would have already spent all its money. A better option is to require the company to use a regulated financial institution, like a bank, as a custodian.
This way, if the company goes bankrupt, the customers can still get their money back. But even this approach has its problems. For one thing, it’s expensive.
At a very high level of generality, what do you think about that? What I would say is:
In 2013, you probably thought “ah, yes, this entity is doing a fraud, and plans to steal the money or crypto.” But (1) you didn’t think about it that much, since these entities tended to be small and cater to a small niche of crypto enthusiasts, and (2) it is not like the crypto entity was coming to your office to have meetings with you.
You may have been aware of some of the smaller, more niche cryptocurrency entities that were doing things that could be considered fraudulent. Maybe you even thought that they would try to steal your money or crypto, but you really didn’t think about it that much. After all, these entities were not coming to your office for meetings.
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