It is the responsibility of governments to prevent and protect investors through laws, regulatory bodies, rules and regulations. But when it comes to crypto-assets, this basic principle does not seem to apply in some countries and appears to be an obstacle in others, judging by what has been seen since these products gained popularity as investment alternatives. Authorities have been indulgent with the creation and negotiation of “cryptocurrencies” and their variants, “tokens”, and have even been involved in cases of widespread harm, such as that of the Argentine $LIBRA, which should ultimately lead to regulatory definition.

The intrinsic value of “Cryptocurrencies”

Is there substance or intrinsic value in these supposed assets? If there is, it does not seem to be the element on which their price is based. What we see is the price fluctuating, skyrocketing or crashing, due to a simple fact or triviality like a tweet from an influential person (businessman, athlete, Hollywood actor), an inopportune call from a president, or extraordinary events such as the acceptance by certain corporations. Probably the only justified factor is the SEC authorization to create various ETFs or mutual funds with them. But that should influence the price of specific references, not the entire segment.

Can anyone reasonably estimate the real value of a unit of Ethereum or Bitcoin? Can any authority refer to the reliability, veracity or compliance with general criteria that allow the negotiation of a “crypto-asset”/ token?

Investors, savers or gamblers acquire what they assume these pseudo-assets contain, whether or not it is something substantial or valuable, without considering the measurement and dimension of the potential losses.

• In traditional markets (stocks, bonds, currencies, commodities) risks, low or high, are assumed with the expectation of equivalent benefits
• A person goes to the casino knowing that he is going to lose, without feeling deceived, both because of the nature of the game and because of the mathematical certainty of the house advantage, which offers nothing more than a random slit to aspire to a tempting profit
• Russian roulette is a deadly, illegal game, in which the risk is death and the main benefit, if there is another, is staying alive.

This is how the Argentine president described, after the collapse, what happened with the token that he had promoted, disseminated, calling it an “economic growth project” that, according to him, would finance small businesses and startups. He confused the “crypto-asset” business with a stock or bond IPO. Or he deceived with it. «The losers were hit by the bullet.” He did not say it as an analogy. The highest authority in a country, which should prevent this type of practice, or at least warn about its risks, encourages it, and then blames the losers.

They are not money, perhaps not even «assets», but they are authorized and promoted

“Cryptocurrencies” are not money because they do not have the necessary properties (acceptability, portability, divisibility, among others), nor do they fulfill the known functions (unit of account, means of payment…), nor do they have intrinsic value. It is not defined or recognized how they should be, nor what requirements they would have to meet to be offered as a formal investment alternative.

Without elements of value, there is no way to stipulate a price. Why did $LIBRA go to market at 17 cents and not at 5 or 1 cent? What fundamentals drove the price so high? We can also ask or wonder why did Bitcoin skyrocket to over $100,000 and not just $50,000 or $10,000?

Most countries do not (yet?) actually consider “cryptocurrencies” to be money and therefore do not allow their formal use in the economy. However, none prohibit trading on parallel markets, and even the United States grants some the status of asset or commodity and authorizes their registration in stock exchanges through mutual funds (mainly ETFs), and their listing as commodities in derivatives exchanges. The warning from a well-known banker who called them a “Ponzi scheme” remained in the air. So, the message to the investors is disconcerting: They are not accepted, nor recognized, but they are authorized.

Protecting the investors or inducing them to buy

Beyond the United States, governments are dissimulation their responsibility to protect investors, who buy, sell, win, lose or suffer scams, by refusing to open up to cryptocurrencies. Governments have reacted when the general damage has already happened (FTX case and now $LIBRA case); but they do not act preventively. Through securities commissions, central banks, treasury departments and even internal security, they could establish standards for creation, production, configuration, and subsequently evaluation and audit, to verify if cryptocurrency managers and supposed assets comply with the qualities and other elements that make them viable. Far from that, in some countries there is an encouragement or willingness for the public to take considerable risks.

This ambiguous attitude of the United States (The Federal Reserve’s «no»; the SEC’s selective «yes») seems to be tending to become unbalanced in the new administration, in which at least one of its secretaries is a driving force behind the phenomenon. Needless to say, a secretary or minister is there to look after the public interest, not his own.

In Europe, it seems that the leaders appear to be avoiding the issue and turning a blind eye. They do not allow crypto-assets, but everyone is negotiating. In Latin America, Argentina and El Salvador want to be seen as innovative, assigning to the population a very high potential cost. And the other countries, including Mexico, are waiting to see what the more developed countries do.

What to do with «crypto-assets»?

At this point, it does not seem feasible to ban “cryptocurrencies”, references or tokens, or to dismantle the structures created, but rather those that upon inspection may be or are scams.

I believe it is possible to regulate them, even strictly, to limit their creation and negotiation, and to make them transparent, but not to accept them as money. And as a principle, to prevent governments and members of their cabinets (on their own behalf or through their huge companies) from promoting, participating in, or inducing the population to participate in them.

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