WASHINGTON, D.C.— Dennis M. Kelleher, Co-founder, President, and CEO of Better Markets, issued the following statement in response to media reports that some members of Congress are pressing their colleagues to pass a crypto industry friendly special interest bailout bill:
“Crypto has had a very bad couple of years as one crypto kingpin after another is arrested, bankruptcies proliferate, lawsuits continue to pile up, and investors/customers lose trillions of dollars. That is no surprise given that crypto has a fundamentally predatory and lawless if not criminal business model. The only action that might save this otherwise worthless and failed financial product would be a legislative bailout due to hundreds of millions of dollars in predatory crypto profits being plowed into the political process to push crypto’s special interests to the top of Washington’s agenda. Or, as award-winning Los Angeles Times columnist Michael Hiltzik brilliantly put it today, ‘The Crypto Scam is on Life Support. Why Are Lawmakers Trying to Give it CPR?’
“Ironically but tellingly, a crypto bailout bill would enact FTX’s criminally convicted former CEO Sam Bankman-Fried’s legislative priorities: put the smallest, least funded, least capable, and most easily capturable financial regulatory agency – the CFTC – in charge of crypto while impairing the ability of the real cops on the crypto beat – the SEC – to go after crypto lawbreakers. There is simply no legitimate, merits-based argument that crypto should get special treatment or a bailout. It certainly shouldn’t be allowed to pick its own regulator, ensuring that it’ll get the least regulation possible. That would not only guarantee millions if not tens of millions of Americans will be ripped off, but also be grossly unfair to all the other law-abiding financial firms who comply with the securities and commodities laws. The crypto industry’s claims to the contrary are false, incomplete, misleading, or meritless, including the following.
- Crypto still has no independently proven, valid, legal, social use even after 15 years of trying (as Rep. Himes has repeatedly pointed out).
- Crypto remains only useful for financing terrorists like Hamas and ISIS, rogue states like North Korea and Iran, enabling sanctions evasion like Russia as well as tax evasion, money laundering for criminals and narco-terrorists (as the shocking details of Binance’s criminal settlement prove), as well as lying, cheating, stealing, gambling, and ripping off investors and customers.
- Remember, ransomware attacks – which are at an all-time high and increasing – depend on crypto, and a crypto bailout bill would almost certainly dramatically increase the number of school systems, cities, hospitals, banks, and every other legitimate business victimized by these cyber criminals.
- Just today there are reports of emergency room patients needing to be diverted across multiple states because of ransomware.
- This is because, contrary to what crypto proponents would have you believe, crypto is not transparent. Indeed: (i) blockchains are anonymous and include no beneficial ownership information; (ii) blockchains can be corrupted by the use of mixers and tumblers; and (iii) centralized or decentralized entities accessing blockchains, and performing off-chain transactions, often are not required to comply with know-your-customer or anti-money laundering and bank secrecy act laws and regulations.
- Crypto trading is a cesspool of fraudulent phantom trading, often referred to as ‘wash trades’: ‘Despite claims of legitimacy, the evidence suggests wash trading is rampant on crypto exchanges’ and an in-depth analysis of 29 major crypto exchanges found that, on average, as much as 77.5% of the total trading volume on unregulated exchanges was due to wash trading – citing wash trading as an ‘industry-wide phenomenon.’
- There is nothing ‘innovative’ about facilitating terrorists, criminals, and gamblers.
- Crypto is not unique. Like decades of financial products, exchanges, dealers, and brokers, it is creating, trading, etc., either securities or commodities, fully covered by longstanding, existing laws enacted after the Great Crash of 1929 with intentionally expansive terms to capture the breadth of products and activities developed in the future.
- The crypto bill is just a bailout for an industry that is dying on its own merits, unless its allies legitimize it by passing special legislation, which the industry will then market as a government endorsement, leading to untold losses if not financial crashes.
- Minimal regulation – or the appearance but not the reality of regulation – is worse than no additional regulation at all because it’ll legitimize the industry while giving false comfort to the investing public who will inaccurately believe that crypto is really regulated.
- Crypto threatens the entire banking system because, once connected to the banking system as would inevitably happen as a result of a bailout bill, crypto won’t be able to be disconnected, which means that when (not if) crypto blows up again it’ll take down the banking and financial systems, inevitably leading to taxpayer-funded bailouts.
- A crypto bailout bill at year end will be infamous history repeating itself: derivatives were deregulated in 2000 when special interest legislation was stuffed into a must pass yearend bill and it then took just 8 years for the unregulated derivatives industry to blow up the financial system and global economy.
- If you liked the catastrophic 2008 global financial crash, you’re going to love the 2030 crypto caused crash because that’s what will almost certainly happen after legitimizing a financial product that has no socially useful purpose, will be de facto unregulated, and is used as a vehicle of choice by criminals worldwide.
- The American people do not support crypto: a CNBC poll found that just 8% of Americans had a positive view of crypto and a Pew survey found 75% of Americans who have heard of crypto are not confident in its safety and reliability.
- The crypto industry continues to make the false claims that 52 million Americans own crypto and more than 100 million ‘plan to buy, sell, or trade crypto in the next year,’ but those are wildly inflated and exaggerated numbers based on a rigged crypto-purchased poll as detailed here.
“If without basis Congress decides to side with terrorists, rogue states, and criminals and pass a crypto industry friendly special interest bailout bill, then the sponsors should be required to invite FTX’s former CEO Sam Bankman-Fried to any signing ceremony. As the primary proponent of the special interest priorities that would be reflected in a yearend crypto bailout bill, SBF shouldn’t be left alone in his jail cell to laugh as his erstwhile allies enact his crypto industry wish list.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.