Overstock CEO: Modern Financial System is a Ponzi Scheme, Collapse Will Bring Global Crypto Adoption

Patrick Byrne, the CEO of Overstock, stated in a recent interview that the entire modern financial system is a “big Keynesian magic money tree ponzi scheme”.

The statements were made during an interview with crypto YouTuber Naomi Brockwell on Monday, October 7.

The CEO of the tech-driven online retailer, which was one of the first major retailers to accept bitcoin, also believes that the modern financial system will eventually collapse, ushering in the global adoption of cryptocurrencies:

“People turn to it where they collapse, like Venezuela or Cyprus or Syria, something like that. When people start getting into it is when their own financial systems collapse.”

When asked about the role of governments in regulating cryptocurrencies, Patrick admitted being a national security libertarian. He believes that know-your-customer (KYC) and anti-money laundering (AML) requirements are important tools to keep criminal activity from thriving on the crypto sphere:

“I guess I must confess, as revolutionary as I am – I’m what you could call a national security libertarian. So I worry about threats to our country. And that means that KYC and AML are not just things to be scoffed at.“

Patrick believes that it is possible to take blockchain to the point where it becomes completely anonymous. On the one hand he loves the idea of becoming truly free and anonymous, but on the other he acknowledges that there will be some bad actors that will take advantage of the situation to hurt others.

Patrick is of the opinion that there is a right balance between freedom and security but “the more the world gets digitized, the more there will be government surveillance.” He trusts that distributed ledger technology can remake society and hopes that authoritarian states are unable to exert control and own the technology. Specifically referring to China, he also expressed his concerns on the country’s plans to rank all its citizens based on a "social score" by 2020.

Patrick thinks that social barriers and stigma and the idea that Bitcoin is mainly used for illegal drug trades and money laundering, are what’s holding back crypto adoption. When asked if Bitcoin will become a worldwide currency or if it will always have specific use cases he replied:

“Now, whether Bitcoin is the one, whether Bitcoin has solved its speed problems or it’s another cryptocurrency, only time will tell.”

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BitMEX Slammed as Roubini Raises the Stakes in War Against Crypto

Neil Dennis

Every new concept has its critics and there's none so vehemently opposed to cryptocurrencies as New York University academic Nouriel Roubini, who has just taken his most vicious swipe yet at the emerging asset class.

In an essay entitled "The Great Crypto Heist", published this week on the website Project Syndicate, the NYU Stern Business School professor accuses financial regulators of "being asleep at the wheel" while an army of unregulated exchanges, propagandists and scammers commit "rampant fraud and abuse".

He singles out crypto-derivatives exchange BitMEX as being a particular threat to retail investors. Roubini clashed earlier this month with Arthur Hayes, the chief executive of BitMEX.

Regulation

But first, the professor explains why the sector needs to be more closely monitored. The broader financial sector came under increased regulatory scrutiny following the 2008 financial crisis, to protect investors and society. 

The regulatory regime does not capture cryptocurrencies, however, which are launched and traded outside the domain of official financial oversight, he says.

The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot.

BitMEX

He rounds on BitMEX, registered in the Seychelles, which offers highly-leveraged bets on the rises and falls of cryptoassets: products more broadly known as derivatives.

These investment products have come under the microscope of regulators in many countries. The UK's Financial Conduct Authority would like to ban the sale of cryptoasset derivatives and exchange-traded notes to retail customers, saying they are too difficult to value and are prone to extreme price movements due to the volatile moves of the underlying cryptoassets.

Other global regulators have made moves to reduce the amount of leverage offered by crypto-derivatives exchanges. Roubini points out that with a 100-1 leverage, even a 1% price move in the underlying assets could trigger a margin call that wipes out the investor's entire account and leave them owing the exchange.

Hayes, boasted openly that the BitMEX business model involves peddling to 'degenerate gamblers' (meaning clueless retail investors) crypto derivatives with 100-to-one leverage.

BitMEX aslo runs a proprietary trading desk - an internal, for-profit desk that trades cryptocurrencies with its own money - that has been accused of front-running its own clients, Roubini asserts. He adds:

Hayes has denied this, but because BitMEX is totally unregulated, there are no independent audits of its accounts, and thus no way of knowing what happens behind the scenes.

Perhaps his most grand accusation in the essay, however, is that exchange is being used for criminal activity:

BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.

Tiff in Taipei

Roubini accused Hayes this month of holding back the broadcast of a video recorded of their clash at conference in Taipei - to which Hayes had secured exclusive right to.

In the essay, he continues this accusation, saying:

I suppose this is par for the course among crypto scammers, but it is ironic that someone who claims to represent the 'resistance' against censorship has become the father of all censors now that his con has been exposed.

Crypto Cancer Metastasized

In his final dig at the industry, Roubini says crypto trading has created a multi-billion dollar industry that does not just include the exchanges, but also "propagandists posing as journalists, opportunists talking up their own books and lobbyists seeking regulatory exemptions.

It is time global regulatory bodies stepped in, he concludes:

So far, regulators have been asleep at the wheel as the crypto cancer has metastasized. At a minimum, Hayes and all the others overseeing similar rackets from offshore safe havens should be investigated, before millions more retail investors get scammed into financial ruin.

So far, Hayes appears to have remained silent following the article's publication. No activity on his Twitter account. But the ball is now firmly in his court as the war of words heats up.