Regulators should crack down on crypto, after it gained an illusion of respectability through association with high-status institutions and individuals
When the Federal Reserve speaks, it speaks in Fedspeak. A pithy turn of phrase or a striking metaphor can all too easily turn into a headline … Tweets: @smdiehl , @antoniogm , @chris_maag , @seneca_lake , @nytopinion , @colinmang , @agrenell , @jimbostanford , @jiminfantino , @vilile , @matthewstoller , @gartenberg , @smdiehl , and @paulkrugman Tweets: Stephen Diehl / @smdiehl : The degree to which universities and professors acted as a reputation laundering service for crypto scams is vastly under-reported. That's how this scam gained “legitimacy” and then used it to defraud the public https://twitter.com/... @antoniogm : Krugman panning crypto: this is the strongest long-term bull signal possible. https://www.nytimes.com/... Christopher Maag / @chris_maag : Crypto is a predatory junkyard. Regulate it. https://www.nytimes.com/... #Crypto #cryptocurrency #cryptocurrencies Seneca Lake Guardian / @seneca_lake : Tradit'l banking is regulated for a reason; crypto has created an environment subject to bank runs, not to mention “theft, hacks and ransom attacks” — plus “money laundering and financing of terrorism.” Other than that, it's all good. https://nytimes.com/... @nytopinion : “But what about all the mostly youngish, not especially rich people who bought crypto because Venmo was flacking it?” @PaulKrugman responded to readers commenting on his column “Crypto Is Crashing. Where Were the Regulators?” Join the conversation: https://www.nytimes.com/... https://twitter.com/... @colinmang : Every time a student asks me my thoughts on #Crypto, I've always started with “total scam” or “it's not actually real and doesn't have intrinsic value”. @paulkrugman's label “pyramid scheme” is probably the most apt description I've seen. @nytimes https://www.nytimes.com/... Alexis Grenell / @agrenell : Krugman strikes again, like lightening “The way I see it, crypto evolved into a sort of postmodern pyramid scheme. The industry lured investors in with a combination of technobabble and libertarian derp” https://www.nytimes.com/... Jim Stanford / @jimbostanford : Exactly 1 yr ago (in @TorontoStar) I argued crypto had absolutely zero economic value, would inevitably collapse, and regulators needed to do their job: https://www.thestar.com/.... No fun saying “I told you so” when people's lives are destroyed. Pierre Poilievre aided & abetted it. https://twitter.com/... Jim Aye / @jiminfantino : I love that when crypto was cool, *very smart people* praised it for existing outside of governments because “this was going to change everything.” Now that it's bleeding out *very smart people* are asking “where were the regulators?” https://twitter.com/... Vili Lehdonvirta / @vilile : Another industry that has “collaborated” a lot with academics is crypto. I suspect the sums involved are orders of magnitude higher than Uber's lobbying funds. https://twitter.com/... Matt Stoller / @matthewstoller : In which Paul Krugman passive aggressively implies his friend Larry Summers is on the take from crypto bros. https://www.nytimes.com/... Michael Gartenberg / @gartenberg : “Other than that, it's all good” https://www.nytimes.com/... Stephen Diehl / @smdiehl : “The way I see it, crypto evolved into a sort of postmodern pyramid scheme. The industry lured investors in with a combination of technobabble and libertarian derp” https://www.nytimes.com/... Paul Krugman / @paulkrugman : How a very dubious industry bought itself the appearance of respectability https://www.nytimes.com/...
Context & Ripple Effects
This op-ed lands at the tail of a two-year arc the related coverage traces clearly: first came institutional courting, with [[a:966893|Fidelity Investments and other big financial players lobbying the SEC for Bitcoin-linked ETFs]]; then the distribution machinery, as crypto tokens let venture capitalists offload their stakes onto an enthusiastic public outside normal regulation.
By mid-2022 the bill had arrived — [[a:980549|strict US rules on risky assets insulated Wall Street from the market tumble while retail investors had no such safeguards]] — and even FTX's Sam Bankman-Fried had conceded that calling yield-farming a Ponzi was "a pretty reasonable response" (his own podcast admission). The editorial's argument is that the sector laundered its reputation through universities, professors, and other high-status endorsers, and that regulators should act on that gap rather than wait for another collapse.
First-order effects
- Retail investors who bought in on institutional endorsements — the BlockFi-style lenders advertising licenses across 28 states — remain exposed, since the same rules that protected Wall Street during the 2022 tumble never covered them.
Second-order effects
- Universities, professors, and celebrity endorsers face reputational blowback as their legitimizing role gets scrutinized, raising the cost of future endorsement deals; incumbents like Fidelity pushing SEC approval for Bitcoin-linked ETFs may find the regulatory mood turning against them.
Third-order effects
- If regulators respond, the industry's growth model — unregulated token issuance feeding on borrowed credibility from high-status institutions — becomes structurally untenable, forcing crypto either into regulated channels or out of mainstream finance entirely.
The trend: Crypto's attempt to buy legitimacy through elite association is colliding with a regulatory reckoning that will decide whether the asset class enters mainstream finance on supervised terms or not at all.