Each day seems to produce another instance of bewilderment as to how on earth there has not been any coherent effort by Congress, the Securities Exchange Commission or relevant federal agencies like the Commodities Futures Trading Commission to create a regulatory framework for cryptocurrency. As Aristotle noted nearly two millennia ago: Nature operates to fill up a space that is left empty; likewise in financial markets, a vacuum created by a lack of regulation and oversight will cause a race of financial activity to fill that vacuum. And this is precisely what we have seen over the last several years in the area of cryptocurrency.
But now with the disastrous implosion of the crypto exchange FTX and its bankruptcy filing, it merits asking again — what is going on with this lack of regulation? How is it that China, the world’s second largest economy, has already developed a framework outlawing cryptocurrency trading and mining, while creating its own digital currency and allowing blockchain and nonfungible tokens (NFTs), and yet we have done nothing? China judged the industry too great a threat financially and environmentally to be allowed to grow unregulated, yet the U.S. has not even gotten to square one in any effort to meaningfully grapple with the relative costs and benefits (if any) of crypto.