On October 26, Jelena McWilliams, chair of the Federal Deposit Insurance Corporation, a US government entity tasked with maintaining bank stability gave an interview to Reuters. In the interview she revealed some of her positions on regulation in the crypto space. Perhaps unsurprisingly, she favors increased regulation and oversight. Her preferred mechanism is to allow for greater bank involvement in the cryptosphere allowing for crypto regulation through existing legal frameworks for banks. She states:

"If we don't bring this activity inside the banks, it is going to develop outside of the banks. ... The federal regulators won't be able to regulate it."

I imagine the collective reply of the crypto community is something along the lines of that’s exactly the point of crypto. To a certain extent that’s true. Anyone who lived through the financial crisis of 2008 has every right to be skeptical of big banks and rampant speculation. The latter applies to both the banks and individual investors in the crypto space (looking at you $ELON).

However, as I’ve written before there are some valid reasons to accept regulation in the crypto space. Investor protection is certainly among them. My question is, does moving the cryptosphere inside the traditional banking system accomplish that goal? Probably not.

This episode once again highlights the need for the cryptosphere to clean up both the real problems that need regulation (ransomware facilitation, blatant tax evasion, illegal transactions of all kinds) and polish it’s public image. Some regulation is acceptable, even desirable. But if the cryptoverse doesn’t take proactive steps to regulate away the problems on its own it will be shoehorned into the traditional baking system, an outcome most crypto holders view as anathema.