When the Federal Reserve speaks, it speaks on Fedspeak.

A concise twist or catchy metaphor can become a headline too easily, causing large market movements and negative public reaction.

Therefore, the language dry technician and euphemisms are usually the way to go.

Given this reality, the frankness of a recent intervention on the cryptocurrency regulation by Lael Brainard, vice president of the Fed, is almost shocking.

It is true that Brainard did not go as far as Jim Chanos, the famous short seller, who called cryptocurrencies a “landfill predator“.

But she was close.

The first headline of his comments was “distinguish responsible innovation from regulatory evasion“, and strongly suggested that much of the cryptographic universe is powered by the latter.

Traditional banking is regulated for a reason; cryptocurrencies, bypassing these regulations, he said, have created an environment prone to bank runs, not to mention “theft, hacking and ransomware attacks”, as well as “money laundering and terrorist financing.

Other than that, everything is fine.

The fact is, most of Brainard’s litany has been obvious to independent observers for some time.

So why just now we hear serious references to regulation?

Cryptocurrencies have existed Since 2009and in all this time they have never come to play a significant role in real-world transactions: El Salvador’s much-publicized attempt to make bitcoin its national currency has become a debacle.

So how did cryptocurrencies come to be worth nearly $ 3 trillion at their peak?

Two-thirds of that value is now gone.

Because nothing has been done to curb “stablecoins”, which were allegedly pegged to the US dollar but were clearly subject to all the risks of unregulated banks, and are now experiencing a series of cascade collapses Who remembers the wave of bank failures that helped make the Great Depression great?

My answer is that while the cryptocurrency industry has never managed to create very useful products in the real economy, it has had a spectacular success in its marketingcreating an image of avant-garde and respectability.

It has done so, in particular, by cultivating exceptional individuals and institutions.

I’m not talking here about the acceptance of cryptocurrencies by libertarians and MAGA types, nor am I talking about embarrassing incidents like that crypto commercial starring. Matt Damon.

What surprises me, however, is the extent to which cryptocurrencies have earned a reputation for respectability through association with high-ranking institutions and individuals.

Let’s say, for example, you use a digital payment app like we sellwhich has amply proven its usefulness for real-world transactions (you can also use it to purchase products at sidewalk fruit stalls).

Well, if you go to the Venmo home page, you will find an invitation to use the app to “start your crypto journey”; in the app itself, an “Cryptography” tab appears immediately after “Home” and “Cards”.

Surely, therefore, cryptocurrencies must be serious.

Let’s say you want to know about cryptocurrencies.

Many popular universities offer programs, usually online subscription courses.

Let’s say you want to know who is recommending the major players in the cryptocurrency industry.

Well, the board of Digital Currency Group, one of the biggest players, includes a co-chair of the board of directors of Brookings Institution and has a former Treasury Secretary as an advisor.

Given this aura of general approval, how many people would have been willing to believe the digital emperor had no clothes?

More specifically, how many would have been willing to accept a regulatory crackdown?

Why did these leading institutions and individuals provide cover for what, as Brainard made clear, is a highly dubious industry?

I doubt there is corruption (unlike the cryptocurrency industry itself, which is overrun with scammers).

In fact, I know from personal experience that you can earn a salary by doing what appears to be an honest job and only later discover that the people who signed the check were scammers.

However, clearly there were and are financial rewards involved.

I don’t know how much money Venmo makes from the people who buy and sell cryptocurrencies on its platform, but it certainly doesn’t offer the service out of pure goodwill.

If you want to take, for example, the Massachusetts Institute of Technology’s online blockchain course, it will cost you $ 3,500.

As I see it, cryptocurrencies have evolved into a kind of postmodern pyramid scheme.

The industry has attracted investors with a combination of technobabble and libertarianism; used some of that cash flow to buy the illusion of respectability, attracting even more investors.

And for a while, even as the stakes multiplied, it became, in effect, too big to be regulated.

One way to read Brainard’s speech is that he was saying that the cryptocurrency crash offers an opportunity, a time when effective regulation has become politically possible. And she urges us to take advantage of it

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