Faced with this panorama, they imagine an ideal world without a State, without Central Banks and therefore without a banking system such as it is today.
The powerful and multifaceted technology called “blockchain” that began to develop at the beginning of this century provided these groups with a conceptually perfect tool to combat these evils: the messiah called bitcoin, cryptocurrency launched in 2008 characterized by reaching a limited issue, being accessible to any individual who can connect to the internet wherever they live, anonymous, secure, with the ability to transfer and receive currency to and from anywhere on the planet. And above all off the radar of the State.
Given the novelty and peculiarity of the concept, it took a few years for it to develop, and for the new crypto ecosystem to be embraced by a growing portion of people and institutions. New currencies associated with cryptography with diverse characteristics emerged; decentralized finances were promoted; All kinds of intelligent platforms were created with the ability to disintermediate not only banks but also other professional groups, different types of products such as works of art with diverse characteristics were freely marketed, the virtual world was enhanced with enriching experiences, being able to projects of social assistance and financial inclusion can also be carried out.
But in this explosive and chaotic cocktail the bible and the water heater were mixed. They were created in a very short time about 15,000 virtual currencies with very high volatilities, the market capitalization reached billions of dollars in that period. But the gold rush attracted the attention of exactly the same universe of actors that operates in the physical world, national and transnational criminal activities, such as human trafficking, drugs, weapons were facilitated by this new technology.
But perhaps the Trojan horse that penetrated the crypto ecosystem was the adoption and reproduction of all the vices of the traditional financial system that it sought to supplant. Unlimited leverage, the exponential growth of the so-called “derived products” associated with crypto assets without any type of state regulation plus a powerful paid communication apparatus to sell illusions, put the system in a position of weakness, which, given the first strong tailwind it received, made the house of cards begin to crumble.
Ironically, the ideal system of cryptocurrencies thought to be immune to the actions of corrupt states and the interventions of central banks began to crack when a state entity, the Central Bank of the United States, raised interest rates, affecting all financial markets. The evident contagion observed in these months highlights the failure of cryptocurrencies in their goal of becoming independent from the traditional financial system.
The relief from the lack of regulations originally achieved by the crypto ecosystem that fueled the bull market, turned into a nightmare when the trend reversed and miscalculations, unpredictability, lack of transparency or plain and simple fraud that further enhanced the fall. The scandalous disappearance of a (supposedly) stable cryptocurrency called Terra that occurred a few weeks ago or the suspension that occurred yesterday in the activities of a well-known crypto platform called Celsius are just some examples of problems that will surely continue to appear as long as this trend continues.
No one can deny the power of technological progress and the infinite range of possibilities it offers, nor predict the future of this industry. Possibly this fall in the crypto world serves to separate the chaff from the wheat, and ends up producing a purge where only those digital assets that are structured on more solid foundations survive.
Faced with the sudden appearance of the crypto phenomenon, the reaction of the states has been idiosyncratic. To cite extreme cases, China prohibited all types of activity with cryptocurrencies, firmly advancing in the implementation of a public digital currency, while El Salvador adopted bitcoin as legal tender due to the fact that the remittances that the country receives from Salvadorans residing in the outside are very significant.
Beyond these extreme decisions, and the fact that each nation must carefully analyze its particular situation, The destruction of wealth that has occurred in recent weeks, added to the fraud spread throughout the world in recent years, directly questions the responsibility of states that, in my opinion, they have an obligation to protect those retail investors who do not have enough financial education to understand these complex products.
*Former president of the National Securities Commission
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
