Sooner or later, a catastrophic event will occur in the cryptocurrency market, a digital financial disaster akin in scope to the Norfolk Southern derailment, but with far-reaching consequences for the global financial system, potentially causing widespread financial losses and economic disruption. These crypto markets are highly volatile, and the potential for significant financial losses exists for those who are gambling on them. Without proper regulation, there may be an increased risk of fraudulent activity, market manipulation, and other types of abuses that could exacerbate the risks associated with "investing" in cryptocurrencies.
Now... were you aware the ChatGPT is a poet? I asked for three poems describing a Ponzi scheme meltdown in the cryptocurrency industry. First I asked for one in the style of Edgar Allan Poe:
In the world of digital gold,
Where Ponzi schemes are often told,
A market crash did soon unfold,
As fortunes turned to fool's gold.
The crypto craze had swept the land,
And many joined the scamming band,
But when the bubble burst at hand,
Their riches turned to shifting sand.
The early birds had made their gains,
But soon the latecomers felt the pains,
As lies and frauds had filled their brains,
And losses poured like heavy rains.
The mastermind behind the game,
Had built a fortune on the same,
But when the pyramid did flame,
He vanished like a guilty shame.
The investors were left to weep,
Their dreams and hopes had been so deep,
But now their assets were asleep,
As Ponzi's secrets they did keep.
Oh, what a tragedy to behold,
A market built on tales untold,
Where greed and lies had made it bold,
And now it falls to deathly cold.
The Ponzi scheme had come to rest,
And all who joined it failed the test,
For in the end, it was a pest,
That robbed them of their very best.
Then I asked for one in the style of another of my favorites, John Keats:
Oh, hapless souls who sought to find,
In crypto's world, a peace of mind,
Their fortunes, born of fraud and guile,
Have left them ruined in the mile.
The pyramid that once did soar,
On promises of wealth galore,
Has crumbled now to ash and dust,
As falsehoods falter, lies combust.
The lure of riches, oh so great,
Had drawn the masses to the gate,
But little did they know the fate,
That awaited them in Ponzi's hate.
The market swelled with greed and pride,
And those who joined became the tide,
That washed away their life's savings,
Leaving them with naught but cravings.
The mastermind, with silver tongue,
Had spun a web of lies among,
And now that web had come undone,
Leaving them all with naught but none.
Oh, crypto market, doomed to fail,
A scheme built on a slippery trail,
Your rise and fall, a caution's tale,
For all who seek a holy grail.
And now, as all is said and done,
The victims stand alone and shun,
The ghosts of promises undone,
That fade away with each new sun.
For in the end, the lesson learned,
Is one that's oftentimes returned,
That when it comes to wealth earned,
Honest toil shall be the truest earned.
Finally I asked for a suggestion of another poet whose style would work best for this kind of poem and the response was Danez Smith. Smith's style is known for its powerful and visceral imagery, as well as its use of colloquial language and pop culture references. They also frequently address social and political issues in their work, making them well-suited for a poem about a financial scandal. I was impressed Chat knew to use the pronoun “they” for this non-binary poet. What do you think of “Crypto Blues?”
Ain't no currency like cryptocurrency,
that's what they told me, said it was the way to be,
Invested in Bitcoin, Dogecoin, Ethereum,
thought I was making bank, I was on my way home.
But then came the news, the Ponzi scheme reveal,
the bubble burst, my profits weren't real,
I watched as my money disappeared into thin air,
I was left with nothing, not even a prayer.
thought I was breaking free from the olden yoke,
but I was just a mark, a sucker in the game,
played by those who wanted wealth and fame.
Now I'm left with the crypto blues,
wishing I had listened to the warnings and the cues,
but hindsight's 20/20, and my wallet's empty,
I'm a victim of the crypto frenzy.
So let this be a lesson to all who dare,
to play with their money without a care,
be wary of the scams and the hype,
or you'll end up like me, with nothing but a gripe.
As the current crypto FTX scandal unfolded it became more and more apparent which politicians Sam Bankman-Fried and his cronies had bought off by lavishing upwards of $100 million on their campaigns. Even today, as SBF faces the possibility of a life behind bars, these unrepentant, arrogant politicians who took his bribes are still opposing effective regulation of the industry— particularly notoriously crooked pols and bribery vacuums like Patrick McHenry (R-NC), Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY), Tom Emmer (R-MN), Katie Britt (R-AL), Hakeem Jeffries (D-NY) and Kevin McCarthy (R-CA). On Thursday Julie Tsirkin, reporting for NBC, wrote that “Congress’ biggest proponents of cryptocurrencies are pushing back against a Securities and Exchange Commission bulletin that would affect how banks and financial institutions account for digital assets.” She was referring to McHenry and Lummis, “who are each working on legislation to [not] regulate the cryptocurrency industry, said Thursday in a letter to the SEC that they have ‘concerns’ about a Staff Accounting Bulletin known as SAB 121.
At issue is how crypto platforms calculate risk. Crypto platforms tend not to include customers’ crypto assets when they calculate how much risk their businesses face. SAB 121 in effective tells them they should include those customer assets in their risk analyses.
The SEC and lawmakers continue to wrestle with how to effectively regulate cryptocurrencies and other digital assets, a subject that has been made more urgent by the high-profile collapse of many major crypto platforms, including Celsius and FTX. Many customers have either lost money or have had their assets frozen as the platforms try to sort out their bankruptcies.
“A recent decision in the Celsius bankruptcy, which classified all Celsius’ customers as unsecured creditors, and therefore at the back of the line to recover their assets, highlights the legal risk of effectively forcing customer custodial assets to be placed on balance sheet,” McHenry and Lummis wrote.
In January, the Biden administration called on Congress to “expand regulators’ powers to prevent misuses of customers’ assets— which hurt investors and distort prices— and to mitigate conflicts of interest.”
The SEC, which is considered the most likely government entity to regulate digital assets, has been wrestling with questions such as whether cryptocurrencies should be considered securities. SEC Chair Gary Gensler has said he believes they are.
How the SEC regulates cryptocurrencies will have major consequences for customers and the many companies that have grown quickly in recent years around the crypto industry. The industry has also leaned into lobbying efforts.
SAB 121, which the SEC’s Office of the Chief Accountant issued last March, represents the first time digital asset platforms are receiving instructions about how to account for the unstable values of cryptocurrencies.
Such bulletins from the SEC are relatively rare (only three have been issued since 2019), and they are issued by staff members to outline their views on how companies should handle certain accounting issues. In August, Gensler defended SAB 121 as being a standard part of SEC operations.
McHenry and Lummis are concerned it would create greater risks for consumers and increase compliance costs for financial institutions. Since the bulletin was issued, the SEC has received pushback from banks and cryptocurrency companies alike.
“Since SAB 121 purports to require banks, credit unions and other financial institutions to effectively place digital assets on their balance sheets, it would trigger a massive capital charge. This in turn is likely to prevent these prudentially regulated entities from engaging in digital asset custody,” they wrote.
In January, McHenry established the first congressional panel focused solely on cryptocurrency and digital assets. The Financial Services subcommittee on digital assets, financial technology and inclusion will be chaired by another leading House Republican on the issue, French Hill of Arkansas.
Lummis, who proposed expansive legislation in June to [not] regulate the crypto industry with Sen. Kirsten Gillibrand (D-NY), plans to reintroduce the Responsible Financial Innovation Act in April, a spokesperson said.