When free markets behave in ways that are perceived as wrong or broken, it’s inevitable that calls for regulation grow louder. We have two examples of this happening recently in the US for cryptocurrency.

First up is Mark Cuban. Whether you like Cuban or not, he has been on the cryptocurrency/blockchain bandwagon for a bit now. And he’s not hopping on the meme machine as much as some might think. If you listen to him talk about crypto, he’s done some solid homework. That said, Cuban was taken by surprise when TITAN, an algorithmic based stablecoin, went to zero. His response? Stablecoins need regulation. Convenient. A free (wild west) market is all good until someone gets hurt. What many who champion regulation as a solution to free market woes end up trying to do is remove pain from the system. In the process we get evermore complicated systems that become expensive and often dominated by entities with the capital required to withstand the regulatory demands. Lessons are no longer learned, they are purchased at an ever growing price. The individual investor is not only protected but run out of the market. The winners are few, and this is just fine with those left standing. Mark Cuban would be one of those chosen few individual investors who could withstand the regulatory burden and continue to profit. Again, convenient. And all done in the name of protecting investors.

The next example is Elizabeth Warren. In fairness to Warren, her calls for regulating cryptocurrency exchanges are consistent with her legislative approach in general. She petitions for government intervention in the markets early and often. Cryptocurrency has escaped her magnifying glass until recently when she called on the SEC to step in and regulate cryptocurrency exchanges like most other exchanges are regulated by the SEC. This is done in the name of consumer/investor protection. What Warren and others who petition for government regulation like this miss is that cryptocurrency has so far withstood numerous scams, crashes, and other weird going-ons without government intervention. Even better is that no exchanges or investors have been bailed out by government in any of this. Laws are on the books against fraud and theft. Those laws need to be enforced. Period. But putting further requirements on cryptocurrency exchanges will stymie innovation, especially when you have decentralized exchanges starting to take off. Imagine regulators trying to make sense of how you regulate exchanges where the motto is “code is law”.

Whether it’s a wealthy individual getting burned by a risky new DeFi protocol or a US Senator looking to add “safety” to a market, the calls for regulating cryptocurrency are misguided. Free markets can seem scary. This is because there are real risks in a free market, and sometimes those risks become issues that result in real consequences. Our modern idea of capitalism has removed this component of risk and either reward or consequence. Modern capitalism seems to be about risk and reward, with consequence removed from the equation at the expense of innovation and individual freedom to participate in markets deemed too risky for most individuals. Hopefully regulators around the world (at least) ignore cryptocurrency for the time being and observe what a free market can provide in a new and blossoming space.