Cryptocurrency and the Need for Regulation: Drawing Parallels with Glass-Steagall

As cryptocurrency prices plummeted, Celsius Network, a significant player in decentralized finance (DeFi), froze withdrawals due to extreme market conditions. The recent crypto crash raises concerns reminiscent of historical financial crises, prompting a call for regulatory measures. Drawing parallels with the Glass-Steagall Act of 1933, which separated commercial and investment banking to prevent the abuses that led to the Great Crash of 1929, the article discusses the need for regulation in the cryptocurrency space.

Glass-Steagall’s Purpose:

  • The Glass-Steagall Act aimed to protect individuals entrusting their savings to commercial banks by separating commercial and investment banking.
  • It addressed the Ponzi schemes dominating the American economy in the 1920s, leading to the Great Depression after the 1929 crash.

Deregulation and Financial Trauma:

  • By the 1980s, the memory of the 1929 financial trauma faded, leading to calls for Wall Street deregulation.
  • In 1999, Glass-Steagall was repealed, ushering in a new era of excessive gambling on Wall Street.

Crypto Crash and Regulatory Void:

  • The recent crypto crash prompts a comparison with the lack of regulation in the 1920s.
  • The Securities and Exchange Commission (SEC) chair, Gary Gensler, highlights the cryptocurrency market’s susceptibility to fraud, scams, and abuse.

Crypto Lobbying and Lack of Regulation:

  • The crypto industry’s lobbying efforts have prevented comprehensive regulation.
  • Former government officials, regulators, and industry insiders, including former SEC chairs and senators, are involved in lobbying for the crypto industry.

Importance of Regulation:

  • The article emphasizes the essential nature of financial market regulation to prevent Ponzi schemes and stabilize the economy.
  • Historical lessons from the crashes of 1929 and 2008 underscore the importance of regulatory measures.

The call for regulation in the crypto space aligns with the need for a regulatory framework to protect investors, ensure transparency, and prevent abuses that can destabilize the financial system.


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