Crossing the Chasm
The full article was originally published by HelloIOTA. Read the full article here.
If the 2008 global financial crisis (GFC) wasn’t inflammatory enough, then the ensuing central bank stimulus probably was. There were €12.6 trillion of negative yielding debt instruments at one point last year. We’re unequivocally living in the lowest interest rate environment of the last 650 years.
Bitcoin was born out of the GFC and forged its identity through this controversial central banking stimulus experiment. If you haven’t read the Bitcoin whitepaper, we’d recommend it. It’ll only take a couple of minutes to get through its 8 pages. Satoshi set the tone for cryptocurrency to be anti-establishment and anti-regulation in that paper which was published on the back of the GFC. The macroeconomic environment certainly did nothing but ratify anti-establishment sentiment.
You’ll remember cryptocurrency enthusiasts lobbying for “self regulation” in 2017. The hope was that distributed ledgers could skirt traditional financial regulation. What they didn’t realize was that widespread adoption requires interfacing with the traditional financial system. Crypto needs capital to enter and exit via on/off ramps just like any other asset class, and those ramps look like banks, traditional custodial agents, and payment processors.
While the DLT world was trying to avoid regulation, the traditional world of finance was still tender from the GFC. Regulation has long been a feature of traditional finance, and the GFC strongly reinforced its necessity in the eyes of Wall Street. Numerous research papers flowed out of prominent institutions following 2008 calling for tighter financial regulations.
Adrian and Shin at the New York Federal Reserve wrote a paper entitled The shadow banking system: Implications for financial regulation. Here’s one written by a Harvard PhD, a finance professor at Chicago Booth School of Business, and an economics professor at Harvard who was also advising the Secretary of the U.S. Treasury: A Macroprudential Approach to Financial Regulation. And here’s the Geneva report on the World Economy written by economists from Princeton, JPMorgan Chase, London School of Economics, and Max Planck Institute: The Fundamental Principles of Financial Regulation.
When this many prominent people from so many upstanding institutions are all talking about the same thing, you know there must be something there.
We’ve gone on to learn that “self regulation”, in fact, doesn’t work, and that institutions need official regulatory clarity before putting their reputation (and legal department) at stake. IOTA has learned this the hard way.
Dan Simerman, the IOTA Foundation’s financial partnerships extraordinaire, spoke to some of these difficulties in his recent IEN interview. The key takeaway is that some potential IOTA partnerships have been held up by two things: