Ripple’s smart $1.25 billion acquisition of Hidden Road is a serious game changer. Others view it as a vital on-ramp linking the fast-paced nascent world of crypto with the regimented, regulated, and slower-moving world of traditional finance. Is it really? Or is it really yet another high-stakes gamble that will ultimately backfire, leaving taxpayers holding the bag. I'm skeptical, and you should be too.

Free Markets Need Room To Breathe

The big premise of crypto has always been decentralization though. It provides a new monetary system completely independent from the meddling of self-serving governments and central banks. Yet now, we are witnessing the rising demand for regulation, for “guardrails” to protect investors. But who protects us from the protectors?

I’ve written a full essay on why I think government intervention in crypto markets is not just uncalled for, but downright malicious. Let the market be the market. Let unsustainable projects fail. That's how innovation happens. Whatever the merits of bailing out failing crypto companies — which just rescues a bunch of incompetent managers and creates further moral hazard — it’s bad policy. Where's the individual responsibility in that? It’s the rough equivalent of adding training wheels to a famous Tour de France racer. It may be a more comfortable ride, but it’s not a speedier one.

Ripple’s move is a step towards providing institutional legitimacy to the broader cryptocurrency space. It unfortunately risks further entangling the industry with the very forces it sought to avoid. This isn’t even about protecting the little guy. It’s creating the kind of system that allows the biggest players to succeed with ever bigger heaps of cash at their disposal, while uniquely protecting them with implicit too-big-to-fail promises. Sounds familiar, doesn’t it?

Individual Responsibility Is Non-Negotiable

Look, I get it. The allure of quick riches is powerful. The allure of financial independence that comes with the crypto space is intoxicating. A lot of people are treating crypto like a casino, throwing money at meme coins and expecting to get rich overnight.

Investing in any opportunity requires diligent due diligence. That said, you should understand what you’re getting into and be prepared to be appropriately skeptical. Crypto is no different. In truth, it requires even greater scrutiny, due to its extreme unpredictability and vulnerability to scammers.

We need to foster a culture of individual responsibility, where investors are empowered to make informed decisions, rather than relying on government intervention or hoping for a handout. Get off the hamster wheel of pursuing the next shiny object! Start with a commitment to prudent financial management, long-term investment planning, and a healthy appreciation for natural uncertainties.

RLUSD allowing for cross-margining across crypto & traditional markets? Sounds to me like a plan out of the “Make America Safe Again” playbook. It only takes one domino to fall.

Unintended Consequences Are Lurking

Bringing crypto into the fold of traditional finance is a new frontier. Ripple imagines a world with a more inclusive and efficient financial system. In the real world, it’s often a very different and more difficult story.

  • Increased Systemic Risk: The interconnectedness of crypto and TradFi creates new avenues for contagion. A collapse in the crypto market could trigger a ripple effect (no pun intended) throughout the entire financial system.
  • Regulatory Arbitrage: Clever players will exploit the seams between regulatory frameworks, creating opportunities for manipulation and fraud.
  • Erosion of Trust: If the integration of crypto leads to instability or losses for traditional investors, it could further erode trust in the financial system as a whole.

Ripple claims that the move to XRPL will make settlement transactions faster and more cost effective. They intend to leverage XRPL’s market-leading throughput and scalability to drive DeFi for institutions. Can the system handle the volume? Can the system be truly secure?

Remember Long-Term Capital Management? Highly educated people felt they could engineer the answer. Remember 2008? The same thing.

We should welcome these changes, but do so with both eyes open recognizing that even in this exciting new world, further unforeseen consequences may await. The third, well-intentioned effort would be to “tame the wolves.” But if passed, it might open the door to an even more horrendous monster.

Please advise your constituents to exercise high risk tolerance whenever investing in crypto assets. Do your own research. Seek advice from qualified financial professionals. And of course, never, ever invest more than you can afford to lose. As fun and adventurous as the Wild West was, it was a pretty scary place too. Don't get bitten.

Exercise extreme caution when investing in crypto assets. Do your own research. Seek advice from qualified financial professionals. And never, ever invest more than you can afford to lose. The Wild West is exciting, but it's also dangerous. Don't get bitten.