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Document Type

Article

Language

English (en)

Publication Date

2022

Publication Title

New York University Journal of Law and Business

Abstract

In a crash reminiscent of the 1929-1933 Stock Market crash in which prices on the New York Stock Exchange fell 83 percent between September 1929 and July 1932 or the 2007-2009 Financial Debacle in which the Dow Jones Industrial Average declined 54 percent between October 9, 2007 and March 9, 2009, crypto market capitalization fell 61 percent between November 2021 and May 2022, collapsing from an aggregate value of $2.9 trillion to $1.24 trillion. Bitcoin, the leading cryptocurrency which in late 2021 traded near $68,000 in November 2021 traded as low as $25,402 on May 10, 2022 (a decline of 63 percent). Coinbase, the leading crypto exchange, fell by 84 percent between its $381 opening price and $61 on May 10, 2021. Most spectacularly, TerraUSD, a stablecoin supposedly pegged to a nonvolatile currency but actually based on a far more risky algorithm, collapsed to prices as low as 10 cents on May 13, 2021, including a spectacular 82 percent collapse in 24 hours. Cryptomania had been succeeded by the Great Crypto Crash of 2022. As with Dante’s First Canto of the Divine Comedy, United States policymakers have three distinct policy choices concerning the future of cryptocurrency: prohibition, regulation or competition. The United States can choose one policy or combinations of the three, but ultimately the United States will have to choose the fundamental approach which guides its response.

This article explains the implications of each policy alternative and concludes with a proposed path forward.

Keywords

Cryptocurrency, Regulation, Securities, SEC

Publication Citation

Joel Seligman, The Rise and Fall of Cryptocurrency: The Three Paths Forward, 19 N.Y.U. J.L. & Bus. 93 (2022)

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