It’s clear that the Bank for International Settlements (BIS) would like to see crypto kept under wraps. To them, crypto is a threat, a destabilizing force that should be kept as far as possible from the old-world finance. But others, including — and especially — Christopher Perkins of CoinFund, view that as adding risk, not reducing it. There are more sceptics. Some, such as Christian Catalini over at Lightspark, consider it a basic misinterpretation of the tech.

Hang on with the Democrat-Republican commies-are-coming-fight-the-regs-heartless-bureaucrats rhetoric for just a minute. Let's look at what crypto really is: a giant, flashing, neon-lit mirror reflecting our own human nature. It’s not even a question of left vs. right, but rather our inherent cravings, our trepidations and our stupidity.

Illusions Of Control Kill Portfolios

Decentralization is the siren song of crypto. Be your own bank! Control your own destiny! It sounds empowering, and it can be. Yet it provides the observer a dangerous illusion of control.

Think about it. Now, you’re on the hook for protecting your own assets, learning in-and-out protocols, and having to make split-second decisions in a rapidly changing market. That's a lot of responsibility. And humans, God love ‘em, almost always overestimate their own abilities. It's called the overconfidence effect, and it's rife in crypto.

You see it every day. People leverage trading positions they don't understand. They jump into meme coins on the back of one tweet. They become victims to scams that offer the promise of guaranteed returns. In reality, they are just gambling, motivated by the hubris that they are the wild card.

This is the issue with crypto. No, this is the issue with people. Crypto just amplifies it.

  • Traditional Finance: Guardrails are built-in, like KYC/AML, and regulations.
  • Crypto: Fewer guardrails, more responsibility, more potential for disaster.

The solution isn’t containment, it's education. Give them the tools to identify not just the benefits but the considerable risks at play. Mandatory risk disclosures, financial literacy programs – these aren’t aimed at stifling innovation, they’re just steps to avoid self-destruction.

Narratives Drive Crypto, Not Fundamentals

Let's face it: most people in crypto aren't deeply analyzing whitepapers or dissecting blockchain architectures. They’re taking the bait from influencers, consuming Twitter threads, and drinking the Kool-aid on narratives.

The narrative is the most powerful weapon in the crypto space. Bitcoin is regularly described as “digital gold.” Ethereum happens to be called the “world computer.” Next is the frothy story of the canine currency that doggedly has supporters barking, “To the moon!”

These stories fuel boom and bust cycles in the market, completely separated from any actual use case or underlying value. Social media serves as an echo chamber. Second, it further magnifies the hype, producing a self-reinforcing feedback loop that accelerates our fear-of-missing-out (FOMO).

Look at the NFT craze. Remember Bored Apes selling for millions? Their ideas didn’t just stop there though. The spotlight wasn’t on the art itself. It was about the status, the connectedness, the story of exclusivity and future wealth.

This power of narrative isn’t exclusive to crypto. It's how markets always work. That’s obnoxious behavior, to be sure, but the speed and anonymity of the internet supercharge it in the crypto space.

To fight this, we need critical thinking. Let’s challenge the assumptions and find out for ourselves. We need to push back on the trend of doing things just because that’s what everyone else is doing. At the very least, regulators should move against obvious misinformation campaigns and all-out pump-and-dump schemes. Ultimately, we need to be responsible for our financial decisions.

Autonomy & Freedom Fuel Adoption

Beneath the hype and the volatility, there's a deeper reason why people are drawn to crypto: the desire for autonomy and financial freedom.

People are sick and tired of being dictated to by banks, governments and corporations. They want more control over their own money, more privacy, and more access to financial services in an increasingly digital economy.

This is particularly so in developing economies, where formal financial institutions are frequently closed, extractive, or dysfunctional. Perkins emphasized how USD-backed stablecoins are often a crucial lifeline during crises for individuals in these countries. Together, these two features provide a stable store of value and make international transactions easier.

This deep yearning for authenticity and agency in the world is a mighty current. That’s the kind of thing that drives the adoption of crypto—that willingness to take a risk, to embrace uncertainty.

The BIS is right to be concerned with the possible misuse of crypto. Removing it in its entirety would be a sad oversight. It would further deprive Americans of access to a technology that can truly help them lead healthier, longer lives.

Instead, we should be looking out for the long-term development of a responsible crypto ecosystem. One that leaves space for productive innovation while protecting consumers, fighting the illicit activity, and more. One that recognizes the broader human goals that adoption seeks to fulfill and seeks to temper the perils their pursuit brings.

In the end, crypto’s fate isn’t tied to communism, libertarianism or any other -ism. Mostly, it’s a mirror, showing our own strengths and weaknesses right back at us. The secret to making our way through that uncharted territory isn’t to vilify the mirror, but to use it to know ourselves more. We need self-awareness, not just regulation. Only then can we put the positive power of crypto to work, and learn from the failures of the past.