Letter: Trial and error may be the way to regulate crypto

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Fabio Panetta (Markets Insight, January 5) argues that caveat emptor, the principle that the buyer is solely responsible for verifying the quality and suitability of goods sold, does not apply to crypto. But why? Crypto assets can be a form of gambling, as Panetta writes. To be fair, no one knows yet.

From bitcoin to the latest stablecoin, these instruments are all fairly new. We’re in an intense phase of price discovery, to begin with because no one knows exactly what these things are for. The good news is precisely that the regulators are not involved: this means that whatever happens to the investors (or players) in question, the taxpayer is now unlikely to foot the bill.

Should we accept regulation because we can’t afford to leave cryptos unregulated?

It is doubtful that regulators have a clearer picture than market participants in almost any market: think of a market in which the assets traded are still a mystery (in terms of their potential and use) for most involved persons.

Financial regulators and central bankers can hardly claim to have a great track record: think of 2007/2008, or more recently of the European Central Bank’s evident inability to track its own inflation target.

In the best-case scenario, regulators would proceed by trial and error: some errors are inevitably charged to taxpayers. In the worst case, they will be captured by some of the market players. Sticking to caveat emptor would avoid at least those two problems.

Alberto Mingardi Director General, Bruno Leoni Institute, Milan, Italy

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