Home » Crypto like ‘World of Warcraft’ economy, regulations would legitimize it, warns Cecchetti

Crypto like ‘World of Warcraft’ economy, regulations would legitimize it, warns Cecchetti

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The demise of FTX has sparked calls among US lawmakers to regulate cryptocurrencies. However, a prominent economist argued this week that doing so would give the crypto industry legitimacy and the economic damage could be more widespread as a result.

Stephen Cecchetti, an economist and professor at the Brandeis International Business School, said: world of warcraftis an online video game with millions of players.

“I think of a lot of this stuff as being like video games, so when you look at the analogue, world of warcraft There are 120 million players and an economy among them. crypto controversy Sponsored by the Brookings Institution. “Fortunately, federal financial regulators are not responsible for overseeing finance. world of warcraftThere’s money involved, but I don’t think anyone would ask them to oversee an online massively multiplayer game.like world of warcraft, in my view, cryptocurrency does nothing to support the real economy, so justifying it just takes creative resources away from production. “

crypto regulation

He argued that creating crypto-specific regulations would impact the way banks approach the sector.

“By legalizing cryptocurrencies, banks will buy crypto assets directly and lend them out as collateral,” he said. Said“Imagine what would happen to us if leveraged financial intermediaries held cryptocurrencies in November 2021 before their value plummeted.”

Since the end of last year, the value of cryptocurrencies has fallen dramatically. Bitcoin, the largest cryptocurrency, has lost more than 60% of its value this year.

Cecchetti said, “If almost all transactions in the cryptocurrency world stay inside the cryptocurrency world without a link to the real economy,” he said, ”It’s as if this kind of thing is happening on Mars. “It will be a transition away from the traditional financial world.” Your system is unaffected. that should be our goal. “

In his view, on cheating, a “defining feature of the crypto world,” prosecutors “aggressively enforce existing laws and, where appropriate, promote things like this.” He said ‘tracking celebrities’ could deal with it.

FTX founder Sam Bankman-Fried charged with Eight crimes, including two counts of wire fraud and six counts of conspiracy related to securities and commodity fraud, money laundering, and campaign finance violations.

“Let’s burn virtual currency”

Calls for tighter regulation have grown in recent weeks following the FTX crash last month.

Senator Sherrod Brown, chairman of the Senate Banking Committee, last weekend called for more regulationand even left the possibility of banning cryptocurrencies open, although he said it would be “very difficult because you know who goes offshore and who knows how it works.” admitted.

and statement After Bankman-Fried’s arrest in the Bahamas, Brown said: Because it shines brightly. “

But Cecchetti says it would be better to “burn the code,” as he and NYU’s Stern School of Business professor Kim Schoenholz wrote recently. financial times digit.

“In the aftermath of the FTX demise, authorities should resist the urge to create a parallel legal and regulatory framework for the crypto industry,” they wrote. “It’s much better to do nothing and just burn cryptocurrencies.”

By intervening proactively, we will “provide an official seal of approval to a system that does not currently pose a threat to financial stability and that will lead to calls for public relief when cryptocurrencies inevitably erupt again.” will be,” they added.

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