One fun (?) thing about cryptocurrency is that it’s newer than regular money — or as the cryptocurrency enthusiasts call it, fiat — and for this reason it is less regulated. I am going to leave the case against regulation to the libertarians who are interested in making it; instead, let’s direct our attention to this Wall Street Journal story about Binance.
Binance, the largest cryptocurrency exchange in the world, had a Robinhood-style oopsie woopsie during a plunge in Bitcoin value on May 19. Users were locked out of the system, and couldn’t make trades to stop the bleeding.
It seems like people are having a bad time!
Now, Robinhood users are suing Robinhood for the March 2020 outages, but Binance doesn’t have a headquarters — so it seems Binance users are having some difficulty figuring out how to sue. I’m not kidding, here’s how the WSJ phrases it: “But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition.” There are apparently two groups trying to figure out how to sue this company, one in France working with 700 people and one in Italy.
This is horrible for the guy who lost more than $70,000 on Binance but it’s also amazing? [Taps forehead] You can’t sue me if you can’t figure out how to serve me. Anyway, Binance claims it “took immediate steps to engage with users affected by the outage” and to provide compensation. The compensation, one user told The Wall Street Journal, turned out to be three free months’ worth of Binance’s VIP platform in exchange for, basically, letting the whole thing go.
It is maybe here that I should mention that the US Justice Department is investigating Binance for its role in money laundering and possible tax evasion.
There are a lot of things to get excited about with respect to Binance but for me, personally, it seems like a real-world test case of libertarian values. The company is relatively unregulated — at least, compared to most banks, which is what the exchanges are primarily recapitulating in the cryptocurrency system — and it turns out that means Binance basically can screw its users with total impunity. It seems like people are having a bad time!
Anyway, I feel sorry for the guy — different guy — who told the WSJ that he lost $3 million because Binance’s app wouldn’t let him sell his position. Perhaps he will reconsider fiat as an investment vehicle.