Letter: Trial and error may be the way to regulate crypto

Fabio Panetta (Markets Insight, January 5) maintains that caveat emptor, the principle that the buyer alone is responsible for checking the quality and suitability of goods sold, “does not apply to crypto”. But why? Crypto assets may be a form of gambling, as Panetta writes. To be fair, nobody knows yet.

From bitcoin to the latest stablecoin, these instruments are all quite new. We are in an intense phase of price discovery, to begin with because nobody is quite sure what these things are for. The happy news is precisely that regulators are not involved: this means that whatever happens to the investors (or gamblers) in question, the taxpayer is, now, unlikely to foot the bill.

Should we welcome regulation because “we cannot afford to leave cryptos unregulated”?

It is questionable that regulators have a clearer picture than market players in almost any market: think about one in which the traded assets are still a mystery (insofar as their potential and their use) to most people involved.

Financial regulators and central bankers can hardly claim they have a great record: think 2007/2008, or most recently the evident inability of the European Central Bank to keep up with its own inflation target.

In the best-case scenario, regulators would move forward by trial and error: some errors being inevitably billed to the taxpayers. In the worst case, they’ll be captured by some of the market players. Sticking with “caveat emptor” would at least avoid both of these problems.

Alberto Mingardi
Director General, Istituto Bruno Leoni,
Milan, Italy