No regulation would have prevented this crime from happening.
I want to be clear here, what happened here is already illegal as is, and no regulation would have prevented it from happening in the first place.
Hell, the firm was already being audited, and those auditors didn't catch the accounting discrepancies, so it's doubtful that any additional regulation would have found this earlier either...
Regulation would have prevented it from occurring. FTX didn't sell its services in the US (FTX US did) and they certainly didn't have a NYS Bitlicense. I think this is facially obvious.
back in the day (as in like 30-60 years ago) a popular scam was to create a situation where frontrunning trades was really easy. there are a million examples of similar things.
i don't think regulation is a good thing when a single person is trading with a single person. but, at some point an exchange becomes so big (they deal, seemingly fairly and with honestly, with many people) where people start to trust it. there is an inflection point where people can take advantage of that part of the human condition. then, you need regulation, not because people are stupid, but because we're human and it is easy to fall victim.
in these cases regulation helps to preserve the trust in the systems. otherwise, people just will not use them, or they will use them in ways that are not beneficial to the group.
We need to have regulation that allows startups to open mini exchanges and banks with easy compliance and unconditional licensing but with heavy restrictions on per customer funds and total funds they are allowed to manage.
The problem is that if you want to open an exchange in say Germany that is practically impossible. You can't get equity or loans for a bank if you don't have a bank license. You need a million or more starting capital to start your own bank. It is a chicken and egg problem.
That leaves a huge hole that unregulated exchanges want to fill and they have a massive competitive edge because they aren't held back by these regulations that are meant for megacorporations.
i do think there is a separate problem entirely that regulations are often really hard to follow, i think limiting the involvement in lobbyists may help there, or at least some lobbyists...
(like, turbotax really should not have a say in how i file my taxes... or how hard it is...)
You aren't wrong, maybe it's my wishful thinking. What do you think the solution is here? Do you think the house of cards stayed propped up because a lot of people were in on the fraud? Were the auditors just incompetent or were they in on it? Auditors are reasonably well known firms.
The solution is simple, relegate centralized exchanges to niches that so far can't be fulfilled in any other way (namely fiat-crypto transactions), and use them only briefly and immediately withdraw any assets from it once the transaction you need is complete.
You may also take on insurance against such malfeasance on the part of the exchange, increasing your likelihood of recovering your funds. On the plus side insurance agencies now have a financial incentive to ensure the exchanges they insure are honest.
In other words, see centralized entities as the unreliable partner that they are and work accordingly.
If you're on HN you can be knowledgable and proactive regarding your security with crypto, but I just don't see mainstream adoption without trusted 3rd parties. I don't think insurers would underwrite that sort of thing given crypto's history.
I want to be clear here, what happened here is already illegal as is, and no regulation would have prevented it from happening in the first place.
Hell, the firm was already being audited, and those auditors didn't catch the accounting discrepancies, so it's doubtful that any additional regulation would have found this earlier either...