How the FTX debacle underscores the flaws of 'libertarian' ideology

17 January 2023

Cryptocurrencies are popular on the right, from MAGA Republicans to anti-MAGA libertarians. But in 2022, the cryptocurrency market suffered a major blow when crypto exchange FTX filed for bankruptcy and criminal fraud charges were filed against its founder, Sam Bankman-Fried. In December, Bankman-Fried agreed to be extradited back to the United States to face charges.

In an op-ed published by The Guardian on January 17, journalist Zoe Williams argues that there are some important lessons to be learned from the FTX debacle. One is that FTX’s downfall underscores the need for strong market regulation. Another is that libertarians are foolish to have so much faith in a market that is insufficiently regulated.

Zoe Williams, today in The Guardian, argues that the FTX debacle underscores the need for market regulation.

“Naturally, if you unshackle a currency from the state and don’t regulate it, that’s a pretty libertarian proposition,” Williams writes. “You might even call it the ultimate free market. So, how’s that panning out for you, lads? Or should I say bros?.... Sam Bankman-Fried has resigned from the cryptocurrency exchange he founded, and FTX has filed for bankruptcy.”

Williams goes on to lay out some reasons why cryptocurrencies aren’t the panacea that some on the right believe they are.

“As Bankman-Fried continues to proclaim his innocence, investigators point in court to a $65bn (£53bn) backdoor between his two companies,” Williams observes. “They’ve also identified tens of millions of dollars of spending on hotels, travel, food and luxury items in under a year. No question, there will be technical details in here that are hard to understand, but there is a principle that is very easily grasped, that is as universal and intuitive as time itself.”

Williams continues, “Markets have never been free: they are social spaces and, as such, have always been governed by rules, which — since the first time a snake-eyed trader tried to cut flour with chalk — work because they are formally determined. Take away those rules, and soon, a greedy, clever person might take advantage. He won’t be able to help himself. He needs the rules as much as anyone else, if not more.”

The Guardian writer notes that billionaire political donor Peter Thiel has been a major cheerleader for cryptocurrencies.

“I think Thiel is right: crypto is the ultimate technology of libertarianism, the final frontier of discovery,” Williams writes. “He just missed the second footfall, which is that, through crypto, we will discover that libertarianism is b******t.”

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