Why Sam Bankman-Fried wanted crypto regulation

Crypto mogul Sam Bankman-Fried, whose apparent Ponzi scheme has collapsed, was a major political player, giving millions to Democrats and buying influence in Washington. His agenda: more regulation.

Consistently, for years, Bankman-Fried lobbied in the media and the corridors of power for stricter federal regulation over his industry.

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You could watch him do so in this 2021 interview with Bloomberg, adeptly summarized by the crypto website Coindesk:

• Controls on lending products “if done properly … can be great for consumers; if done properly, they can give consumers way higher returns on their assets,” Bankman-Fried said.
• Bankman-Fried said a ban on stablecoins would be “sad,” given how useful they are. “There’s other sorts of regulatory interventions, which I think would be healthy.”
• He agreed that more regulation could be beneficial for crypto exchanges: “It’s a long time coming, and it’s completely necessary — and we’re very much for it.”

In October 2022, less than a month before his companies collapsed, Bankman-Fried published a manifesto calling for regulation, including licensing laws. This put him at odds with his competitors and other players in the industry.

Why would the titan of crypto want regulation? Part of it is that big guys like regulation because it creates a barrier to entry for smaller players, who are less able to afford regulatory costs.

Also, Bankman-Fried was much more politically connected than any other crypto player. He was President Joe Biden’s second-biggest donor and had multiple White House meetings to discuss regulation. A more regulated industry would be a home game for Bankman-Fried’s companies.

Plus, he appeared to believe regulation would lure more suckers into his web, saying regulation would “provide a pathway for [banks and other traditional financial firms] to get involved in digital assets. That’s frankly something I’m excited about here. I think a lot of them have been waiting for clear federal oversight of this space to get involved.”

Tellingly, since the collapse of his companies, in a bizarre interview over direct messages, Bankman-Fried admitted that he didn’t believe regulations would really protect consumers.

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To me, it looks like Bankman-Fried knew he was running a Ponzi scheme, and he thought that if he were regulated, it would give him more market share and also give his marks more confidence in the scheme he was running.