How envy created the cryptocurrency monster

How envy created the cryptocurrency monster

How envy created the cryptocurrency monster
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The billionaire investor Charlie Munger is fond of quoting his Berkshire Hathaway partner Warren Buffet’s observation that: “It is not greed that drives the world, but envy.” This summarizes the frenzy and chaos of the cryptocurrency markets. Crypto is the perfect platform for fraud and delusion, but it is indeed envy that has created this monster.

The collapse this month of the FTX crypto exchange, founded by 30-year-old Stanford graduate Sam Bankman-Fried — universally known as SBF — is a perfect example of this envy ruling the world.

A crypto exchange is basically a website on which account holders can buy and trade cryptocurrencies. This bankruptcy of FTX wiped billions off dollars off the total value of crypto assets, which dropped below $1 trillion. The consequences will affect not only cryptocurrencies, but also politics and lobbying.

There is in essence no difference between crypto mania, the frenzy of stock markets in the previous century, and the creation of every financial bubble in history. The development of crypto has been possible with the new digitized and interconnected world we live in, amplified by social media platforms. The reach empowered by mobile apps unleashed a cult-like following of celebrities and business personalities that boosted the sector. It turned followers into obedient financiers, and transformed celebrity capital into financial as well as political gains.

This new formula has blurred the lines between business, politics and entertainment even more. Indeed, in the US and elsewhere there has been a political polarization in business. SBF is the Democratic Party’ssecond-biggest donor, with contributions of to $40 million, and filed for bankruptcy days after the midterm elections. What is strange is that no one asked how the owner of a company that is only a few years old and still expanding could donate this huge amount to a single party.

This is generating the same type of polarization that other political topics do between Republicans and Democrats, especially after the results of the midterms. Republicans on social media ask why SBF hasn’t been interrogated, or even detained, after this collapse. Their answer is that he is protected by the Democratic Party. This line of thought goes even deeper and into conspiracy theories that FTX laundered money for Ukraine and the Democrats.

Regardless of the needs of regulation, business should not be about politics and more importantly politics should not be ruled by business.

Khaled Abou Zahr

These conspiracy theories are now amplified by sympathetic coverage of SBF and the FTX collapse in pro-democratic media such as The New York Times. However, it dangerous to cast doubt on important institutions such as the US Justice Department, falsely accusing them of corruption and bias. This sows the seeds of illegitimacy and pushes greater division between political formations.

In fact, the topic of crypto is linked to politics because it is a nascent industry. The regulation around it still needs to be framed. This means that there is a great need for global lobbying to present the needs of the sector and how to allow it to continue developing. This can be a matter of life and death for companies in the sector. Indeed, a new regulation by lawmakers can literally shut a company down. Hence, lobbying and explaining the stakes to lawmakers is an important part of large successful companies. The same applies to other industries that are closely regulated, such as pharma or energy. And in this perspective, clout matters.

However, it is easy to see how successful hype can provide influence without substance. Kevin O’Leary, the Canadian entrepreneur and TV personality nicknamed Mr. Wonderful, was a spokesperson for FTX and saidhe felt comfortable and reassured about the crypto exchange because the founder’s parents were compliance experts. But as soon as it collapsed, damaging his reputation, he began calling for Washington to regulate the sector. Why didn’t he come to this conclusion before? He is now facing a class-action lawsuit with other celebrities who promoted FTX.

Crypto is no different from any other security or financial instruments. The risks are the same, if not greater, and FTX’s lobbying efforts might have been linked to this. However, crypto does not adhere to the same rules as securities. Undoubtedly this needs to happen to protect retail investors — and it would probably shut down most of the existing crypto businesses that do not have the capacity to apply the same level of compliance imposed on other securities such as stocks or other financial instruments.

Regardless of the needs of regulation, business should not be about politics and more importantly politics should not be ruled by business. Yet we all know that human nature will stay the same and envy will continue ruling the world across new technologies.

• Khaled Abou Zahr is chief executive of Eurabia, a media and tech company, and editor of Al-Watan Al-Arabi.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point of view