Earlier quoted context omitted.
And this is the problem. These guys are not regulated. There is no transparency. There are no external auditors. There is no control. When we find out, it is always too late. Every "cryptocurrency bank" is a potential Enron. I fear both the involvement of Central Banks and at the same time the lack of it. If EY (or anyone else serious about this) 'follows the money' then that would be a very interesting report to rea…
This would seem to be a private problem. If people choose to park their money with a non-transparent, unaudited random crypto startup, that's their decision and their problem. I'm not interested in paying for "regulators" in such cases.
I think the most important societal issue is that it damages investor and consumer confidence.
As a parallel, consider food regulation. When I go into a store or restaurant, the food I buy is very likely to be safe, because there are a lot of regulators making sure it happens. If they weren't operating, then I'd have to exert a lot more effort to make sure that each thing I eat is safe. Not only would this be a giant waste of effort, but it would significantly reduce the opportunity for innovation and cost reduction, because people would be reluctant to try new products and new restaurants.
Market confidence is even more important for finance, because it's much harder for individuals to know if a given company is really working. It would be a huge problem for society if everybody went back to keeping their money in mattresses and physically moving it everywhere.