Last Updated: 13 July 2022
Paul Krugman thinks it is high time the crypto sector was properly regulated because, until now, crypto companies have mostly pretended to be a respectable financial industry.
— CryptoJournaal (@CryptoJournaal) July 13, 2022
Nothing but marketing
So far, the crypto currency industry has been mostly good at marketing and has used that skill to give itself a respectable image until things went wrong. In an opinion piece in the New York Times, economist Paul Krugman writes that the industry maintained an “illusion of respectability” by luring investors and advisors with fancy talk.
The NY Times piece reads like a long rant against the crypto industry that ends with a statement of support for a Federal Reserve official who argues that the crash in crypto markets should be used as an opportunity to strictly regulate the sector.
Venmo as an example
Krugman thinks that crypto companies are trying to buy credibility by using well-known people for advertisements and hiring people with a good reputation in the traditional financial sector as advisors to their companies.
As an example, the Nobel laureate cites Venmo, the US payment service similar to Tikkie, which also started offering crypto currency by inviting users to start their “crypto journey.”
“I don’t think there was corruption,” Krugman begins somewhat suggestively. “Yet there was and is clearly monetary rewards. I don’t know how much Venmo earns from people buying and selling crypto through its platform, but it certainly doesn’t offer the service out of charity,” he writes.
Crypto is a pyramid scheme
Paul Krugman’s main objection is that it cannot live up to its built-up image of a respectable new branch of the financial industry.
“As I see it, crypto has degenerated into a kind of post-modern pyramid scheme. The sector lured investors with a combination of techno-speak and libertarian drivel; it used some of the cash to buy an illusion of respectability, which attracted even more investors. And for a while, even as the risks piled up, it became too big to regulate,” says Krugman.
Fed Vice Chairman Lael Brainard argued in a speech that the drop in crypto markets is a good time for regulation. The crash of recent months makes regulation “politically possible.” Krugman agrees because, right now, crypto is not a threat to the stability of the entire financial system.