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posted by janrinok on Sunday December 18 2022, @02:23PM   Printer-friendly
from the regulating-self-regulation dept.

Germany wants countries to regulate the crypto industry after the FTX and Bankman-Fried debacle- Technology News, Firstpost:

Germany's top regulator this week called for global regulation of the cryptocurrency industry to protect consumers, prevent money laundering and preserve financial stability.

Mark Branson, the president of Germany's financial market regulator BaFin, also known as the Federal Financial Supervisory Authority of Germany, said a that hands-off approach that would "just let the industry grow as a playground for grownups" was the wrong tactic.

"We've seen the self-regulated world. It will not work," Branson told journalists in Frankfurt on Tuesday evening.

Branson was speaking hours after U.S. prosecutors accused Sam Bankman-Fried, founder of cryptocurrency exchange FTX, of misappropriating billions of dollars and violating campaign laws in what has been described as potentially one of America's biggest financial frauds.

[...] Regulation of the industry has been loose and patchwork at best. Germany requires licences for banks to deal with cryptocurrency.

[...] The European Union has been working on a new Markets in Crypto Assets Regulation (MiCA) that some, including European Central Bank President Christine Lagarde, say would need to be broadened out in a future iteration and branded "MiCA 2".


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  • (Score: 2) by quietus on Tuesday December 20 2022, @05:28PM (3 children)

    by quietus (6328) on Tuesday December 20 2022, @05:28PM (#1283365) Journal

    "But one can't say the same of the global real estate crisis of 2008 which was in large part due to those poor choices made by "better" regulators."

    While it's true that Fannie Mae and Freddie Mac played a substantive role in the rise of prices in real estate before 2008, let us not forget that the true tools of the Great Recession of 2008 and beyond were CDO's and CDS's, and these were 'self-regulated' by the industry.

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  • (Score: 1) by khallow on Wednesday December 21 2022, @01:17AM (2 children)

    by khallow (3766) Subscriber Badge on Wednesday December 21 2022, @01:17AM (#1283431) Journal

    While it's true that Fannie Mae and Freddie Mac played a substantive role in the rise of prices in real estate before 2008, let us not forget that the true tools of the Great Recession of 2008 and beyond were CDO's and CDS's, and these were 'self-regulated' by the industry.

    Keep in mind as the largest sources of capital, the FMs were the dominant self-regulators of CDOs and CDSs. And a big thing missed here is that US regulators (similarly with European regulators) had determined that institutions playing with these securities could leverage ownership of these securities to ridiculous levels. As I understand it, the securities were treated in the US as being as reliable as normal real estate, which they might well have been - normal real estate was not reliable in 2008 either, and then permitted to be leveraged to the degree of 50 borrowed dollars for every one dollar of ownership - I believe it was 40 to 1 and higher in most of Europe.

    And there's plenty of other regulation even in the lands of self-regulated securities.

    • (Score: 2) by quietus on Thursday December 22 2022, @05:33PM (1 child)

      by quietus (6328) on Thursday December 22 2022, @05:33PM (#1283608) Journal

      Not exactly. What happened was that banks circumvented their regulated leverage ratio (the amount of cash they need to have at hand versus the amount of loans outstanding). They did so by creating so-called SIVs (structured investment vehicles), whose only purpose was to offload the banks own loan securities, then slice-and-dice 'em with other securities, then sell those mixes as packages to third-party investors. (Slice and dice 'em means taking slices of high-risk loans -- say C-rated -- and combining these with high-quality (say A++) loans, and selling the mix as an A-minus package.)

      The devil was with the SIVs, and their limited lifeline (in terms of financial support when things went South) to the banks that created those very SIVs in the first place. The uncertainty with regards to those, and consequentially the CDO/CDS market, was what led to a freezing of the interbank market by the middle to end of October that year; and that was the real crisis.

      • (Score: 1) by khallow on Friday December 23 2022, @01:15AM

        by khallow (3766) Subscriber Badge on Friday December 23 2022, @01:15AM (#1283663) Journal

        What happened was that banks circumvented their regulated leverage ratio (the amount of cash they need to have at hand versus the amount of loans outstanding). They did so by creating so-called SIVs (structured investment vehicles), whose only purpose was to offload the banks own loan securities, then slice-and-dice 'em with other securities, then sell those mixes as packages to third-party investors.

        In other words, banks "circumvented" regulated leverage ratio by selling off their loans to other parties? Sounds like their leverage ratio didn't actually change for real.

        The devil was with the SIVs, and their limited lifeline (in terms of financial support when things went South) to the banks that created those very SIVs in the first place. The uncertainty with regards to those, and consequentially the CDO/CDS market, was what led to a freezing of the interbank market by the middle to end of October that year; and that was the real crisis.

        In other words, the issuing banks weren't threatened by these SIVs going south, their investors who very often were other banks, were.