Looking back over the posts on these pages over the past few years (and my Twitter feed!), readers may wonder if I've focused on anything other than Britain's political woes. Fortunately, I've been distracted by numerous legal developments, covered extensively on The Fine Print, Keynotes, Ogier Leman's "Insights" pages, LinkedIn and, most recently, Mastodon. A prominent theme is commentary on attempts to introduce legal certainty and controls into the volatile world of cryptoassets, alas too late to avert the string of collapses that have peaked (so far) with FTX... Contagion still lurks and has crossed into traditional financial firms, including Australian pension funds. Two main thoughts leap out from the morass:
- Tech evangelists should stop pleading for ‘light touch regulation’ and explain any significant externalities associated with their technology which need to be addressed. There may be no ‘choke points’ within the energy guzzling Bitcoin protocol itself but consider the role of crypto-exchanges, wallet custodians and decentralised finance (DeFi) operators that enable lending, trading and so on: FTX demonstrated that greed and stupidity still lurks around crypto-tokens, so the tech still needs regulatory tools to guard against related human misconduct; and
- Similarly, the fact that major venture capital firms invested in FTX while receiving investments through FTX's trading arm - and their due diligence seems to have 'missed' the complete absence of ‘traditional’ governance/controls - raises questions about (a) potential tracing claims by FTX clients' assets into the VCs' funds; and (b) whether FTX was effectively an unincorporated association with an array of corporations designed to encourage the idea that it was a 'traditional' corporate group, such that the participants may have unlimited liability...
Well, at least that's off my chest.
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