Tharman Offers a Simple Solution to Regulate “Crazy” Crypto

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Disclaimer: All opinions expressed below belong solely to the author.

I have long believed that the greatest talent of one of Singapore’s most beloved and respected politicians, Chief Minister and Chairman of the Monetary Authority of Singapore (MAS), Tharman Shanmugaratnam, is his ability to go to the gist of any problem and present it in a few words.

Or, quite simply: put your finger on the head.

And he did it again during the panel discussion at the World Economic Forum summit in Davos on January 18, this time talking about regulation of the crypto space – in a way that I don’t think did not receive enough credit.

To regulate or not to regulate?

In my own industry coverage here on Vulcan Post, I have often remarked that the entire cryptoverse – and all the currencies it produces – is simply meaningless without absolute government regulation or support.

And the need to impose some form of legal boundaries on the space found common support among panel members, including Citigroup CEO Jane Fraser, UBS Group Chairman Colm Kelleher and Bank Governor of France, Francois Villeroy de Galhau. .

However, what Tharman pointed out really turned the common idea of ​​regulating crypto on its head.

It’s typical for politicians to want to impose control over things that carry huge risks to the public. However, what if the simple act of regulation ends up helping to legitimize the risky activity, making it inherently more dangerous for people who are betting their savings on things they shouldn’t be?

I think it’s crypto or traditional finance, you have to regulate things like money laundering – that’s very clear.

But beyond that, if we’re going to regulate crypto in the same way that we regulate banks or insurance companies, I think we need to step back and ask a fundamental philosophical question: does this legitimize something that is inherently, purely speculative, and actually kind of crazy?

– Minister Tharman Shanmugaratnam

In other words, what if the cure was worse than the disease? It’s a real risk that we don’t talk about.

And as president of the MAS, Tharman knows firsthand the complexity of the issue.

Despite the fact that MAS has imposed strict licensing requirements for companies offering crypto-related services in the city-state, this has not been enough to protect everyone from the risks of the highly volatile industry. operating on a largely borderless Internet – as the bankruptcy of Three Arrows Capital or the collapse of FTX have shown.

Regulators can’t do much, and that’s made even more difficult by the fundamental unpredictability that accompanies new technology that doesn’t conform to standard ways of doing things.

Lawmakers face the unenviable task of balancing the risks and rewards of innovation, trying to protect millions of people while encouraging productive technological progress.

Too many rules can discourage investment, but too few can lead to the ruin of people already targeted by unscrupulous scammers in many other ways.

What would Tharman do?

Would we be better off just providing ultra-clarity that this is an unregulated market and if you go there, you go there at your own risk?

…we need to regulate one segment of the business (like regulated stablecoins with full support, etc.), but trying to regulate everything is going to be a never-ending game, and I’m not sure that’s the right way to go. follow.

– Minister Tharman Shanmugaratnam

In other words, what Tharman offers is freedom with disclaimers, warnings and education for individual customers.

However, this freedom would only extend to the borders of traditional finance.

Essentially, as long as crypto firms don’t want to offer services typical of traditional banks, they and their customers are operating at their own risk (perhaps with some exceptions applicable to asset-backed, stablecoins, etc., such as companies making certain claims about what they offer).

But the moment they want to cross the border into mainstream financial services, they would simply fall under the existing rules that apply to banks and other financial institutions – no special treatment.

If crypto companies want to do things that traditional finance does, you apply the exact same regulations to them (regarding liquidity, reserves, etc.), under a regulatory system.

– Minister Tharman Shanmugaratnam

This, frankly, is a beautifully simple cut to the Gordian knot that the topic of crypto regulation has become over the past couple of years.

So, for the most part, few new rules are really needed.

In addition to preventing criminal activity and ensuring companies don’t make unfounded claims, the regulatory environment for any service to compete with TradFi is already there.

Just extend it to these digital businesses when they want to offer deposits, loans, transactions, etc.

Meanwhile, everything else is just a gamble and you have to take the risk. If you want to throw a million dollars at a picture of a drunk monkey, that’s on you.

Featured Image Credit: World Economic Forum

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