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If regulators thought crypto was a dangerous place that lured investors into ‘too good to be true’ opportunities, they have to ask themselves some searching questions on why they have been so slow or reluctant to cut across the unregulated industry.

Senior global central bankers have said cryptocurrencies are essentially worthless and labeled the sector the ‘Wild West’ of finance, but inaction across the regulatory spectrum has allowed speculative bubbles to inflate.

And now burst.

As ranks of ‘mom and pop’ investors see their investments and even life savings obliterated in the crypto market meltdown, a U.S. Treasury official said on Thursday there is an “urgent need” for more adequate safeguards to be put in place.

On Tuesday, Securities and Exchanges Commission Chair Gary Gensler lamented the lack of disclosure from crypto firms and platforms offering investors returns of up to 7%.

“If it seems too good to be true, it just may well be too good to be true,” he said.

Gensler, also a former Commodity Futures Trading Commission Chair, has long highlighted the potential risks. He and his peers at other agencies have had their hands tied by the lack of Congressional urgency and guidance on crypto market safeguards.

Another reason may be the blurred lines in Washington on how crypto is treated from a regulatory perspective: as a security, commodity, or property?

Whatever the inertia or logjam in Washington, the upshot is ordinary investors have been left to fend for themselves and are now suffering the consequences.

“Regulators are in some way late to this in terms of consumer protection. A lot of real people have lost a lot of real money, and don’t understand what’s going on,” said Charley Cooper, former chief operating officer at the CFTC and currently director at fintech firm R3.

“It falls to regulators to put in place consumer protection rules that ensure moms and pops are able to get the information they need. Especially in places as unregulated as crypto.”


The magnitude of the crypto crash, which has intensified in recent weeks as U.S. interest rate hike expectations have surged, is astonishing.

Bitcoin plunged to an 18-month low around $20,000 this week. It has lost around 28% since Friday, more than half of its value this year, and is down 70% from a record high $69,000 in November.

Crypto lender Celsius this week froze customer withdrawals and terraUSD and luna tokens collapsed last month. According to CoinMarketCap, the global crypto market’s value has tumbled to under $900 billion from a peak of almost $3 trillion in November.

Not everyone has been able to get out in time. According to Blockchain analytics firm Glassnode, bitcoin at $21,000 puts 45% of investors underwater on their holdings.

Yet by some measures, retail investors are doubling down and view the selloff as an attractive buying opportunity.

Vanda Research data shows that retail investor net inflows into crypto-related stocks and exchange-traded funds over the last 10 days has leaped to $570 million, a pace not seen since January last year.


On the face of it, buying in the white heat of a market meltdown makes little sense. But perhaps they can be cut some slack, given the ferocity of the publicity blitz that crypto is a legitimate, attractive, safe, and lucrative investment.

Take the network TV coverage of the NBA final playoffs game on Monday between Boston Celtics and Golden State Warriors, seen by millions.

Crypto exchange platform aired an ad featuring star player Joel Embiid, closing with its much-ridiculed signature slogan, “Fortune favors the brave.”

Rival platform Coinbase ran its commercial showing tweets over the past decade stating “Crypto is dead,” before closing with the legends “Long live crypto” and “Building for 10 years and counting.”

That same day, bitcoin tumbled 15%. The next day, Coinbase said it was firing almost 20% of its workforce, and the firm’s shares fell 5% to take its losses for the year to around 80%.

These ads are merely two examples of the onslaught from crypto firms to get the public to part with its cash. A host of celebrities has been paid handsomely to be the faces of the industry’s ads, sponsorship, and promotion.

Perhaps most astonishing of all was the on-stage presence of the two keynote speakers at a crypto conference in the Bahamas last month: Bill Clinton and Tony Blair.

Jan Ondrus, associate professor of Information Systems at ESSEC Business School, Asia-Pacific in Singapore, is sympathetic to regulators’ predicament of protecting citizens while allowing the industry to innovate.

“We cannot expect traditional regulators to be experts on crypto. They need time to educate themselves on this topic to make the right decisions,” Ondrus said.

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