Friday, February 7, 2020

The Pope, The Reporter, The Regulator and Supremecy (and Bitcoin)

I must declare, upfront, that the Financial Times' Jemima Kelly is not responsible for what follows.
Okay, she's responsible for some of what follows, from FT Alphaville:

CryptoMom wants to give the crypto kids a break
When you think of the crypto industry, what kind of images does your mind conjure up? Do you see caution, restraint and austerity? Or is it more excess, profligacy, and greed?

For the Securities Exchange Commission (SEC)’s Hester Peirce, a commissioner at the US financial regulator with libertarian leanings, it appears to be the former.

Ms. Peirce — whom blockchainers have nicknamed “CryptoMom” because of her ongoing support for cryptocurrencies — gave a speech to the International Blockchain Congress in Chicago on Thursday, where she announced that she was proposing a new rule. Crypto start-ups, she said, should get a “safe harbour period” for three years after they issue their tokens, during which time they shouldn’t be subject to the normal regulations.

In a speech entitled “A Proposal to Fill the Gap Between Regulation and Decentralization”, Peirce told revellers:
When we see people struggling to find a way both to comply with the law and accomplish their laudable objectives, we need to ask ourselves whether the law should change to enable them to pursue their efforts in confidence that they are doing so legally.
Entrepreneurs across the crypto landscape are facing just such a scenario in their attempts to develop worthwhile and beneficial products. Whether it is issuing tokens to be used in a network, launching an exchange-traded product based on bitcoin, providing custody for crypto assets, operating a broker-dealer that handles crypto transactions, or setting up an alternative trading system where people can trade crypto assets, our securities laws stand in the way of innovation.
Yeah, because after all, why can’t setting up a trading system for crypto assets (essentially, in our view, facilitating gambling) be laudable and beneficial and worthwhile? And why shouldn’t i n n o v a t i o n come first for once?....


Following the Great Financial Crisis we had a series of posts on regulation, credit default swaps, bucket shops, Federal preemption of state law (supremacy, article vi, clause 2) state anti-gambling laws and various comments from folks learned and otherwise. A snip from a November 2011 post:

Are Derivatives Contracts Nothing More than Unenforceable Gambling Debts?
...Here's the U.S, Senate testimony of Eric Dinallo, then-Superintendent of the New York State Insurance Department on October 14, 2008 (8 page PDF).
...I have argued that these naked credit default swaps should not be called swaps because
there is no transfer or swap of risk. Instead, risk is created by the transaction. Indeed, you
have no risk on the outcome of the day’s third race at Belmont until you place a bet on
horse number five to win....

...“Bucket shops” arose in the late nineteenth century. Customers “bought” securities or
commodities on these unauthorized exchanges, but in reality the bucket shop was simply
booking the customer’s order without executing on an exchange. In fact, they were
simply throwing the trade ticket in the bucket, which is where the name comes from, and
tearing it up when an opposite trade came in. The bucket shop would agree to take the
other side of the customer’s “bet” on the performance of the security or commodity.
Bucket shops sometimes survived for a time by balancing their books, but were wiped
out by extreme bull or bear markets. When their books failed, the bucketeers simply
closed up shop and left town, leaving the “investors” holding worthless tickets....
Which had been preceded by July 2010's "Financial Reform: Enforce New York's 1908 Bucket Shop Law and trash the 2,319 Page Dodd-Frank Bill":
It is time to dispense with this congressional foolishness and enforce the 1908 Bucket Shop law.
Throw in some state anti-gambling statutes and you would have prevented the financial meltdown....
And so on.
In 2009 it was Charlie Munger who, in addition to, as he put it:
"I didn't set out in life to become the assistant leader of a cult."
-Mr. Munger at the 2007 Wesco annual meeting as recorded
by T2 Partners' Whitney Tilson
Is also a name partner at a pretty damn high-buck law firm:
An Interview with Berkshire Hathaway's Charlie Munger (BRK. A)
Grundfest: You and your partner, Warren Buffett, have for years warned about the dangers of the modern derivatives markets, particularly credit derivatives, and about interest rate swaps, currency swaps, and equity swaps.

Munger: Interest rate swaps have enormous dangers given their size and the accounting that has been allowed. But credit default derivatives took that danger to new levels of excess—from something that was already gross and wrong. In the ’20s we had the “bucket shop.” The term bucket shop was a term of derision, because it described a gambling parlor. The bucket shop didn’t buy any securities. It just enabled people to make bets against the house and the house furnished little statements of how the bets came out. It was like the off-track betting system.

Grundfest: Until the house lost its money and suddenly disappeared. Or the house made its money and suddenly disappeared.

Munger: That is right. Derivatives trading, with no central clearing, brought back the bucket shop, because you could make bets without having any interest in the basic security, and people did make such bets in the billions and billions of dollars. Some of the most admired people in finance — including Alan Greenspan — argued that derivatives trading, substituting for the old bucket shop, was a great contribution to modern economic civilization. There’s another word for this: bonkers. It is not a credit to academic economics that Greenspan’s view was so common.
There is much more.

In 2018 we had:  "Pope says credit default swaps are unethical"

But to date the Pope has not weighed in on cryptocurrencies.

In his 2015 Encyclical, Laudato Si  Francis gave technology in general the Papal thumbs up.

In 2017 the Pontifical Academy of Social Sciences held a symposium on human slavery in the 21st century and one of the speakers, Joseph Mari from the Bank of Montreal spoke on Bitcoin's role in the trade.
But no wider comment on the tech.
Personally, I think they are planning to roll out Vaticoin any day now.

And finally, as an offering to gentle reader for putting up with me this far, from June 2017:
Yesterday I Learned About ATMs 
It started with Paul Murphy at Alphaville's Markets Live:...

...Which of course led to the question "Do the Vatican Bank ATM's really have instructions in Latin?"
(I had heard that from a less-than-reliable-source)

As it turns out, the answer is:,fl_progressive,q_80,w_800/17ktqx1deauuejpg.jpg

Yes, Latin is one of the language options.
In fact there's even a TIL thread at reddit.
Which managed to stay on topic for about four comments:
Pope: Why do I have to push "1" for Latin? It should only be Latin! If you're gonna come here, learn the language! Foreigners!

"And then they ask 'Are you sure you want to withdraw $DCXLII?'"
"$642? The ATMs in the Vatican give out ones!?"
Smallest note in the EU is €5 Maybe it's €640 and two Hail Marys?

"Romanes eunt domus."
The line is "People called 'Romanes' they go the house." "Romanes" is not a Latin word; he pluralized a second declension word as if it were third declension, so it doesn't translate to anything.

"Eunt?? What is eunt???"
3rd person plural present active of the verb 'eo, ire', meaning to go.
And from there it just descended into madness.

Until Il Papa decided to show off by making a withdrawal: