Ever since ol’ Satoshi burst on the scene dragging his blockchain, crypto has gone through a number of cryptomania cycles, reminiscent of earlier boom-and-bust bubbles like Tulip Mania and Railway Mania.
Boom-and-busts like these did not repeat because there is always some next big thing nonsense to feed the pig.
Crypto in contrast, just keeps popping and busting like popcorn, with occasional burnt bits in the bottom of the pot. Sometimes crypto busts because of a sudden loss in confidence by investors, often with good reason but as often not. Sometimes the bust is caused by a scandal involving just about every vice known to man and some invented for the occasion. The latest major bust and probably not the last, is the Bankman-Fried FTX Trading scandal. May we hope that this bankman will be fried? Don’t hold your breath.
Nanny, in some form or another, is always involved, sometimes preemptively to “prevent trouble” but always afterwards to shut the gate after the pigs have left. Did the crooks of the world discover that crypto is ideal for laundering money? Nanny was a little slow with her response but by golly she certainly shut that gate firmly - twice.
I am sceptical about crooks laundering money using crypto. They are, without any doubt, performing crooked deeds with crypto, but the greater bulk of money in need of laundering still comes, so far as I can tell, in the form of cash. Turning cash into crypto is, how can I put this, like shovelling out a 2000 pig stye onto a kiddie kart and dragging the loads onto a distant field for spreading. I don’t think it’s a popular thing with crooks but I digress.
Rarely has a bust happened by nanny poking her nose in. Alas, those days will be remembered with nostalgia - Retroactive Nanny has arrived.
Having invoked the derogative “nanny”, permit me to pause and clarify; I am focused on the type “Incompetent, Power Mad Nanny” - competent nannies can relax now.
Retroactive Crypto Nanny - Harbinger Of A Trend
Retroactive Crypto Nanny made her public debut in the UK early in October having been very busy in the USA and Europe for at least a year.
I stumbled over her work a few months ago when I made some small bitcoin (Btc) purchases with which to test my Lightning Network nodes. After a number of uneventful trades using funds held in a high street bank, Retroactive Crypto Nanny struck suddenly and locked the account, allegedly to perform a security check. Locking up the entire account after rather than before a potential problem is nanny procedure for “keeping me safe”. Having been informed by email that I would have to call a given number to reinstate the account, I innocently tried my luck.
That turned out to be a telephone model of Ouroboros - I just ended back at the first number I had called after being directed to a chain of numbers, the operators at each either not picking up or having no knowledge of lockdowns.
A few days later, I received a call from a bank agent who informed that she was doing a security check. There followed a telephone grilling that would have been applauded by a gestapo or FBI agent. This very aggressive person demanded to know what the money was for. That it was for a service did not satisfy - she wanted to know the deliverable. My suggestion that it might be considered to be my business, was angrily rejected. In short, the account remained locked down. There was nothing for it but to go to the nearest branch and argue it out - there were bills to pay.
My Friendly Banker To The Rescue
I am happy to report that the in-branch experience was unexpectedly un-KGB-like. A calm and helpful young man listened to my problem and proceeded to work his way through the bank’s bureaucracy until he found someone tasked with sorting out lockdowns. That took almost as long as it had taken me to get back to square one with telephone-nanny. He then spoke to the person himself, explained the problem and why it had to be sorted right away and only then did he put me on the phone to talk.
The young man on the phone put me through the usual “let’s help the old fart avoid being scammed” routine. As this went on, it became clear that he had no idea what a blockchain is, what a cold storage crypto wallet is, that there is no “physical delivery of the product”, that ownership depends on who owns the keys and nothing else. When I mentioned that my crypto keys were held non custodially, I could almost hear his anal sphincter cramping up, so I hastily explained that it is good security practice not to trust any exchange or bank to keep crypto keys safe because most of the largest crypto heists so far were perpetrated on custodial accounts. He then told me how educational he had found the chat and removed the locks on the account.
I did not know whether to be relieved or horrified. Clearly this eager and helpful young man had been given a task for which he was completely unqualified. He had a script that effectively put crypto security on the same footing as email or telephone phishing scams. If I had been a victim of a crypto scam, he would not have been able to help me. Indeed he would have had no option but to tell me that he was very sorry that my money was gone. Even if I had not been scammed, crypto losses are not covered by the bank’s guarantees anyway. Had I been a crypto scammer he would have had no idea how to expose me. The entire process was pointless.
On the brighter side, if I had not taken the risk of giving him a lesson in crypto, I would never have discovered the UK’s Den Mother of Retroactive Crypto Nannies.
How Many Nannies Does It Take To Screw Up Crypto Trading?
After my bank encounter, a persistent question appeared above my head; I could see it in the mirror. It enquired to know WTF happened? The internet oracle quickly coughed up interesting little nuggets - nanny had been hard at work, out in the open (if anything as labyrinthian as a government website could be classified “open”) since early 2022 and the big exchanges were still surprised when the SHTF.
Some Nuggets To Break Your Teeth On
News story From: HM Treasury Published 4 April 2022
Government sets out plan to make UK a global cryptoasset technology hub
The government has today announced moves that will see stablecoins recognised as a valid form of payment as part of wider plans to make Britain a global hub for cryptoasset technology and investment.
UK has just 18 months to become global crypto leader, parliament report urges
On Monday, the crypto and digital assets all-party parliamentary group (APPG) published 53 recommendations for how the UK government should act. Taking views from crypto regulators, experts, and parliament sessions, the group found that the UK “still remains in the very early stages of regulation.”
See those scare quotes? And now:
The piece de resistance, in all caps, no less.
REPORT: REALISING GOVERNMENT’S VISION FOR THE UK TO BECOME A GLOBAL HUB FOR CRYPTOCURRENCY & FINTECH INNOVATION
“We want this country to be a global hub - the very best place in the world to start and scale crypto-companies…. If crypto-technologies are going to be a big part of the future, then we – the UK – want to be in, and in on the ground floor” - Keynote speech by John Glen, Economic Secretary to the Treasury, at the Innovate Finance Global Summit during Fintech Week April 2022.
Read the whole thing and weep. A horde of incompetent loons have volunteered to clamp an anchor on the blockchain. You think I exaggerate? Feast your eyes on this:
FCA warns crypto memes could breach financial promotion rules
Read the FCA bulletin if you do not value your sanity.
That brings me to my brush with FCA.
It was quite clear that my bank knew I had been buying crypto all along and had not had a problem with it , until the FCA on 26 October 2023, published Cryptoasset registration: information for applicants. By that date, I had already put through a number of Btc purchases without a hitch, but nanny had just woken up to shut the gate. Here is the key quote from the link that put the shit in the machine at my bank:
We provide the below information on typical questions you may have about getting your registration ready, associated individuals and what happens after you’ve submitted your application.
What? The world of UK finance had still not listened to nanny? Clearly it was time to give them the shock of their lives.
Suddenly, all banks and other financial institutions were threatened with losing FCA accreditation if they did not comply, effectively immediately. Since the regulation was hastily written and poorly thought out (duh), a number of accredited traders headquartered in other countries, simply stopped trading crypto in the UK, leaving customers, including me, high and dry. The large local ones gritted their teeth, lobbied for a short deadline extension and got to work to earn re-accreditation.
Oh, did I not mention that while this was going on, I had my scheduled GBP crypto orders cancelled without notice by my Swiss crypto exchange? Silly me, yes they did, explaining that they simply were not willing to face the cost and bureaucratic tangle that compliance would entail. They also very helpfully pointed out that, since the FCA regulations relating to currency exchange were unaffected (crypto being an asset not a currency) we could simply convert our GBP to CHF, stay calm and carry on. So much for effective control of crypto trading.
Still Not Out Of The Woods
Turns out, they had under estimated nanny. To stay with my favourite Btc peddler, I now had to trade my GBP for CHF or EUR. One look at the rates that my bank was charging sent me scurrying for alternatives, only to stagger into another Nanny fracas.
‘Tis a defining characteristic of incompetent nannies that they don’t know much about behaviour, but they know exactly what they don’t like when they see it. Children are exhorted “to be good little boys and girls” but the little horrors better figure out what that means for themselves, because nanny is not going to be told “I only did what you said nanny”.
The not-so-little-horrors in this case quickly sprang into action. The banks and exchanges in typical cartel fashion quickly put their heads together and came up with a compliance scheme that put the risk firmly back on the customers, using the ancient dodge of covering their ample arses at our expense. Clearly the FCA thought that was exactly how the public should be protected - there was no pushback from that quarter.
The cartel had en-bloc decided that the new KYC starts with capturing and storing a selfie of the customer, effectively introducing facial recognition into the world of FCA compliance without the FCA even having to hint at it. Some cartel members took an extra step, demanding that new customers provide a selfie showing a driving license or similar, in full view next to their face - voila! facial recognition and identity theft in one.
I backed out of one such application. They then had the gall to ask me to review their application process. My review suggested that their reps should be required to send selfies of themselves with their ID on full display, to all applicants, just to make sure we were all collectively culpable for breaching the UK’s data privacy and anti ID theft laws. I don’t think they published it.
Security at my chosen currency exchange worked pretty much as it had at the bank. A few conversions went through without a problem, then someone thought their might be crypto involved, took one look at my date of birth, a-a-a-a-a-n-n-n-d it was lockdown time again! Then came the same stupid save the old fart questions, this time burdened with demands for both proof of source of funds and proof that the product had been delivered. To enhance the dystopian atmosphere, the check was done by online chat, which could not cope with the blizzard of stupid questions, stalling repeatedly for minutes on end without any sign of life.
We have to conclude then that nanny’s approved system for ensuring the safety of customers is to thoroughly violate our privacy so that the bank can prove how well they know us. What did I expect, customer care? Competence? Pictures of the inside of my knickers would have been as conclusive and less invasive.
This lot also asked for an onboarding review and got it with both barrels. They were hurt, surprised and disappointed in me.
Once again free to exchange currencies to buy crypto, only with nanny frowning over my shoulder, I was ever so glad that my little stash was safely in cold storage offline.
My Gloomy Prediction For The Rest Of This Year
Soon nanny’s crypto booms will be in full flood:
The general public is as ignorant of crypto security practice as the banking and government nannies. Both are apparently gung-ho for trading crypto, so full speed ahead. There are even regular reports of teenagers trading crypto on their mommy- and daddy-funded cellphones. How about “For the price of a cup of coffee, your teen can learn how to invest in cryptocurrency.”
Judging by the surprised reaction to my criticisms of the exchanges’ onboarding practices, most members of the public are as happy to post their most private banking details and IDs onto an exchange as they are to post their most intimate personal business onto social media.
The greater majority of them are also clearly as content to leave their crypto keys in a custodial wallet online as their exchanges are delighted to have them doing so. Why would the latter advise them to take their keys offline when they need to boast about “billions in reserves”?
Soon after that is in full swing, no later than first quarter 2004, nanny will cause a bust when she becomes alarmed at the proliferation of happy idiots falling for novel crypto scams.
These scams will bear no relationship to phishing, dodgy emails or humorous memes, because they will be perpetrated by means of dodgy apps and webpage security scripts. The memes will be the most FCA compliant possible.
We can also expect a rash of insider stealing, encouraged by easy access to clients’ personal IDs and data while account lockdowns will become as commonplace as there are fat arses that need covering.
Nanny will double down, of course, with more rounds of shutting the gate, regulations, turgid laws, new taxes, what else? Retroactively wherever possible.
Meanwhile, back at the blockchain, Bitcoin Primed for 'Supply Shock' as Exchange Balance Drops to 5-Year Low, Analyst Says, and Crypto Exodus: Over $2 Billion in Bitcoins Pulled from Exchanges in 90 Days.
Good to see that some investors at least have a clue.