Last month, I published an op-ed in the Wall Street Journal that argued for a ban on cryptocurrency in order to combat the ransomware plague that is devastating our economy and businesses across the country. My premise is simple. Cryptocurrency has been around for over a decade; that is more than enough time for us to take a step back up and assess its societal benefits and costs. Such an objective assessment would find that the risks to our economic and national security do not outweigh whatever modest benefits crypto provides.
Understandably, my article attracted a lot of attention and new interest in my crypto-related scholarship. Therefore, I thought it would be fun to go back through my previous blog posts on cryptocurrency and see how well my analysis has held up.
What follows is a short summary of every crypto-related blog post I wrote or co-wrote for this blog since 2017. In the world of crypto, everything old is new again, so I have also refreshed my summaries with new market developments that provide additional context. All posts are listed in chronological order except one (The SEC Should Continue to Say No to Bitcoin Exchange-Traded Products) as I thought it sensible to list both Bitcoin ETF posts in successive order.
My hope is that by seeing these posts in one place, you will come away with a greater awareness of the speed with which the cryptocurrency industry has evolved and the tremendous pressures this has placed on regulatory agencies to keep up. Going forward, The FinReg Blog will continue to be a resource for those wanting to stay abreast of the latest in cryptocurrency law and policy.
(11/22/2017) The Case for a Cryptocurrency Market Bubble, with Ryan Clements and Sean Semmler:
We published this piece amidst the first Bitcoin bull run in the fall of 2017. While acknowledging that making price predictions is a fool’s errand—it still is—we argued that Bitcoin was in the euphoria phase of a classic Minsky asset bubble. We were proven correct less than a month later when the price of Bitcoin plummeted immediately after peaking near $20,000, ushering in what came to be known as the crypto winter of 2018. Many of the same euphoric dynamics we identified in 2017—sensational news stories, price volatility, fraud, and buying on hope—are present in today’s crypto market. Indeed, Bitcoin is down over 40% from its April 2021 high of $65,000, leading some to speculate that another crypto winter is upon us.
(12/05/2017) Why a Bitcoin Bubble is a Good Thing, with Ryan Clements and Sean Semmler:
After correctly identifying a crypto bubble in our previous post, we went on to explain why a bubble may be a good thing. We argued that as long as asset bubbles are not too large, “society can benefit if the innovation which gave rise to the bubble is put to beneficial use.” At the time, the market capitalization of all cryptocurrencies was $330 billion, investors were not levered, and crypto was not integrated into the legacy financial system. Therefore, it was easy to conclude that when the Bitcoin bubble popped, the damage would be self-contained, which turned out to be the case.
In defense of a crypto bubble, we stated:
“When the cryptocurrency bubble bursts, it will not mark the end of cryptocurrencies or the blockchain technology underpinning them, just like the dotcom bubble did not mark the end of the Internet. Instead, these new technologies will be deployed in a way that can reduce costs and generate efficiencies for existing businesses.”
Our argument was premised on research that found previous asset bubbles led to higher spending on research and development. This spending allocated “capital to long-shot paradigm shifting innovation.”
It is hard to argue that crypto or blockchain have contributed to “paradigm shifting innovation” in the three and a half years since we published this piece. Maybe more time is needed, but the government may not be able to adopt a hands-off approach the next time a crypto bubble inflates. Crypto’s market cap now exceeds $1.5 trillion, many crypto investors have bought on margin, and the sector is interwoven throughout the legacy financial system. We concluded our post with a warning:
“While our fragmented regulatory structure has thus far prevented heavy handed intrusions in the cryptocurrency market, it could also someday prevent an appropriate and necessary response should the cryptocurrency market grow to such a degree that the cost-benefit calculus changes in favor of greater intervention. But that is a problem for another day.”
This day has arrived, but crypto’s regulatory framework in the U.S. is just as fragmented.
(12/13/2017) Bitcoin Futures are a Bad Idea
Amidst the 2017 Bitcoin bubble, the CBOE Futures Exchange (“CFE”) and the Chicago Mercantile Exchange Inc. (“CME”) self-certified new contracts for cash-settled bitcoin futures contracts. When the contracts launched on December 10, 2017 and December 17, 2020, investors, for the first time, had access to a liquid and regulated product that could be bought and sold through online retail brokers like E-Trade and TD Ameritrade. Most importantly, cash-settled futures allowed retail traders to speculate on the price of Bitcoin without ever having to actually own it.
Self-certification requires the listing exchange to verify the new contract is not readily susceptible to manipulation. My argument then, as it is now, is that the ease with which Bitcoin can be manipulated all but guarantees that any kind of Bitcoin derivative can be manipulated. I was also concerned about the reference rates the exchanges utilized to price the contracts. Bitcoin continues to violate the “law of one price,” an economic principle wherein the price of an identical security or commodity should have the same price regardless of where it is traded. Therefore, CFE and CME had to develop elaborate mechanisms to calculate a reference price that was credible and difficult to manipulate. In the case of CME’s contract, the reference rate was determined based upon prices across four Bitcoin spot exchanges, all of which were unregulated and had limited trading volume. I noted:
“The fundamental problem is that Bitcoin is simply not traded in large enough volumes to prevent a determined manipulator from placing several large trades across multiple exchanges and moving the price of Bitcoin in their desired direction.”
My concerns around manipulation in the Bitcoin spot market are shared by the SEC. When the SEC first rejected a Bitcoin ETF in 2017, it was due in part to concerns that the listing exchange was “unable to enter into, the type of surveillance-sharing agreement that helps address concerns about the potential for fraudulent or manipulative acts and practices in the market for the Shares.”
While there has yet to be any high-profile cases of manipulation in Bitcoin futures, market research indicates that it has indeed been going on from the very beginning. In 2019, Arcane Research found that Bitcoin dropped on average 2.27% towards contract settlement each month, compared to an average fall of just 0.06% on a random day over the same period. This suggests “that the bitcoin price is manipulated in advance of CME settlement.”
Thus far, investors do not appear to have much appetite for crypto futures. CFE stopped offering new contracts in March 2019 and current open interest across all Bitcoin futures is just short of $12 billion. This supports my initial premise that the push for cryptocurrency futures was not coming from investors, but from the exchanges that stood to profit by listing these contracts. This premise is further validated by the 2018 launch of Bakkt, a subsidiary of Intercontinental Exchange that now offers cash and physically-settled Bitcoin futures contracts as well as options, and CME’s launch of cash-settled ether futures contracts in February 2021 (ether futures are also lightly traded, with just 3,527 open contracts currently).
(01/04/2018) For Bitcoin Futures, the CFTC Defends the Indefensible
My concerns around Bitcoin futures contracts were shared by others at the time, including several large financial institutions. Why, then, did the CFTC let these contracts come to market?
Several weeks after the contracts launched, the CFTC took the unusual step of defending their decision to allow CBOE and CME to self-certify by releasing a “backgrounder on its oversight of and approach to virtual currency futures markets.” In the “backgrounder” the Commission explained that the self-certification process, which was created by Congress, left them little choice in the matter. As the name implies, self-certification is a process whereby the exchange verifies that a new contract complies with Commodity Exchange Act and CFTC regulations. Provided the CFTC does not object to the findings of the self-certification, which they have the authority to do, the exchange may list the new product the day after submitting the self-certification.
Despite what the Commission said, and continues to say, they did have the authority, and, in my opinion, the obligation, to halt the self-certification of Bitcoin futures. Designated Contract Market (DCM) Core Principle 3 stipulates that a contract cannot be readily susceptible to manipulation. As emphasized in my previous post, manipulation in the Bitcoin spot market all but assured manipulation in the futures market.
In the backgrounder, the CFTC doubled downed on their decision by implying that Bitcoin futures would somehow curb manipulation in the spot market:
“Had it even been possible, blocking self-certification would not have stemmed interest in Bitcoin or other virtual currencies nor their spectacular and volatile valuations. Instead, it would have ensured that the virtual currency spot markets continue to operate without federal regulatory surveillance for fraud and manipulation.”
Fast forward three and a half years and it is pretty clear that the presence of Bitcoin futures contracts and the surveillance sharing agreements in place between the CFTC and futures exchanges have done nothing to curb manipulation in the crypto spot market. A cursory look at the CFTC’s crypto-related enforcement actions indicates they have mostly gone after low hanging fruit, like unregistered firms offering crypto swaps or blatant cases of fraud. Part of the CFTC’s challenge is that they do not have jurisdiction over “spot or cash market exchanges and transactions involving virtual currencies that do not utilize margin, leverage, or financing.” This means that cryptocurrency trading is unregulated at the federal level. While the CFTC does have the authority to police underlying commodity spot markets for fraud and manipulation, they do not have the tools or visibility to understand what is happening in cryptocurrency spot markets.
Thus far, cryptocurrency derivatives have garnered little interest and have not influenced the broader crypto market, but obviously that could change. If the crypto market continues to grow and attract broader interest from corporations and institutional investors, we will likely see additional derivatives products. As I noted in a journal article that expanded upon my initial criticism of Bitcoin futures: “self-certification is an inappropriate process for listing complex new derivatives.” In February 2021, CME pushed the envelope once again when they self-certified a carbon-offset futures contract. It is clear that the financial system would be better served by closer scrutiny of fundamentally new types of derivatives contracts, and I encourage Congress to amend the self-certification process.
(01/12/2018) SEC Stands Firm Against New Bitcoin ETF Proposals
Unlike the CFTC, the SEC has proceeded cautiously and prudently when it comes to cryptocurrency. To the chagrin of many crypto enthusiasts, they have yet to approve a Bitcoin ETF. The SEC first threw cold water on a Bitcoin ETF in March 2017, when they rejected a proposed rule change from the BATS BZX exchange that would have allowed them to list an ETF created by Tyler and Cameron Winklevoss that invested directly in Bitcoin (Winklevoss Bitcoin Trust).
After Bitcoin futures came to market, the SEC received a flood of new proposals for a Bitcoin ETF; in the first two weeks of January 2018, seven different Bitcoin ETF proposals were withdrawn at the request of SEC staff. These new ETF proposals differed from the original Winklevoss ETF in that they planned on investing primarily in Bitcoin futures contracts and not in actual Bitcoin.
The SEC’s main concern has always been manipulation in the underlying Bitcoin spot market. When they first rejected the Winklevoss ETF, they noted that the proposal was inconsistent “with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”
The SEC codified their concerns in January 2018 when they released a staff letter that listed a series of questions that must be satisfactorily answered by the exchange-traded product’s (ETP) sponsor before the agency will authorize a virtual currency-related ETP. First, will investment funds have the information necessary to adequately value cryptocurrencies or cryptocurrency-related products given their volatility, the fragmentation and general lack of regulation of underlying cryptocurrency markets, and the nascent state and current trading volume in the cryptocurrency futures markets? Second, what steps would funds investing in cryptocurrencies or cryptocurrency-related products take to assure that they would have sufficiently liquid assets to meet redemptions daily? Third, to the extent the fund plans to hold cryptocurrency directly, how would it satisfy requirements to properly safeguard these assets?
The Commission made it clear that until these questions can be satisfactorily answered, it would be inappropriate for fund sponsors to initiate registration of funds that intend to invest substantially in cryptocurrency and related products.
(06/18/2019) The SEC Should Continue to Say No to Bitcoin Exchange-Traded Products
I doubled down on my critique of a Bitcoin ETF in June 2019 when I submitted a comment letter to the SEC in opposition to CBOE BZX Exchange, Inc.’s proposed rule change to list and trade shares of SolidX Bitcoin Shares (“Shares”). In my letter, I noted that the whole notion of a Bitcoin exchange-traded product is bizarre, because “unlike other Commodity ETPs, where it is unfeasible or undesirable for an investor to acquire the underlying—most investors don’t want to hold on to corn, gold, wheat, oil and so on—it is easy for investors to acquire and store bitcoin because bitcoin is a digital asset.” This is a critique I stand behind. Why do investors need a Bitcoin ETF when it is already easy to acquire Bitcoin on an exchange like Coinbase or Gemini? I argued:
“The truth is that the Shares serve no economic purpose other than to provide a means to speculate on the price of bitcoin without having to acquire actual bitcoin. While the Commission is not required to assess the economic purpose of new products being listed through exchange rule changes, I strongly encourage the Commission to consider the implications of authorizing a liquid instrument that will be used to speculate on an asset-class that is ripe with fraud and manipulation.”
A Bitcoin ETF remains the Holy Grail for many crypto entrepreneurs, including former White House communications director Anthony Scaramucci. As far as I can tell, the structure of recent Bitcoin ETF applications is no different than the ones the SEC has previously rejected. Take, for instance, CBOE’s March 2021 application to list and trade shares of the VanEck Bitcoin Trust. CBOE’s argument this time around is basically: “the Bitcoin market is much larger and more evolved than the last time we applied so you—the SEC—can’t possibly reject an ETF this time.” Specifically, they point to the development of over-the-counter Bitcoin funds, the OCC’s decision to permit national banks to provide cryptocurrency custody services, companies like Tesla buying Bitcoin, and the launch of a bitcoin ETF in Canada. They then attempt to turn the tables on the SEC by pointing out all the ways investors can get exposure to Bitcoin, including buying physical Bitcoin, are, from a consumer protection standpoint, inferior to an ETF. They say: “premium volatility, high fees, insufficient disclosures, and technical hurdles are putting U.S. investor money at risk on a daily basis that could potentially be eliminated through access to a bitcoin ETP.”
If your argument for a Bitcoin ETF is that the Bitcoin spot market is crap, you do not have a winning argument. That said, I do think it is only a matter of time before the SEC signs off on a Bitcoin ETF. As the ecosystem continues to evolve and attract greater institutional interest, it becomes harder to keep saying no. I liken it to a child who hounds his parents to buy him a toy so often that the parents eventually give in out of sheer exasperation.
It doesn’t help that the CFTC continues to permit the self-certification of crypto futures. Cash-settled futures and ETFs provide similar exposure; they both allow an investor to take a directional position on Bitcoin’s price without having to worry about holding “physical” Bitcoin. All it takes to get a Bitcoin ETF is three likeminded SEC commissioners, something which very well could happen during the Biden administration, and would almost certainly happen during a future Republican administration.
(06/11/2018) Reflections on NYC Cryptocurrency Conference
I have been to just one cryptocurrency conference and I can say with certainty that one is enough. Reflecting on my experience at Consensus 2018 in NYC, I noted that “there is too much talent, passion, and money going into the [blockchain] industry” for it be a mere fad. And while I was correct, I still struggle to see how crypto—specifically—and blockchain—more generally—will disrupt products, processes, or services that the majority of people currently rely on. And as I said in my WSJ article, it is clear that crypto-fueled ransomware attacks are doing far more damage to our economy than whatever benefits crypto provides.
But my opinion has not swayed millions of crypto evangelists. Based upon videos and press reports from last weekend’s Bitcoin 2021 conference in Miami, very little has changed in the three years since I attended Consensus. A cross between a tent revival and a rave, crypto conferences are opportunities for the true believers to remind themselves how right they are and how wrong all the doubters are. How else can you explain a podcast host screaming: “we’re not selling! Fuck Elon!”, or an audience member jumping on stage, ripping his suit off to reveal the logo for Dogecoin, and yelling “Dogecoin to the moon,” or a panelist stating: “if you’re against Bitcoin, you’re against freedom.” Every bubble needs a narrative. These conferences reinforce and perpetuate the narrative.
(10/15/2018) The Revolving Door Comes to Cryptocurrency
It was only a matter of time before the revolving door, which has long been present in the financial sector, came to the cryptocurrency sector. In this post, I provided a brief historical overview of the Washington-Wall Street corridor and cited studies that indicate “concerns around the revolving door are overstated, and that the practice may actually have some benefits.”
So, what should we make of the revolving door coming to crypto? I noted that although “cryptocurrency firms may benefit from the knowledge and expertise of former regulators serving as directors or advisors, the primary factor motivating these appointments is a desire for legitimacy; and this is where the comparison to the traditional Washington-Wall Street revolving door breaks down.”
When a consumer is deciding on where to open a new checking or savings account, they will consider a number of factors, but it’s fair to assume their choice will not be influenced by who sits on the bank’s board of directors. The same cannot be said for consumers who are deciding which exchange or digital wallet to use for their cryptocurrency transactions. In this instance, the presence of the former Comptroller of the Currency or FDIC Chairman on the board of directors may signal trust and legitimacy to consumers and therefore sway their decision-making.
The revolving door has only spun faster since I published this post in the fall of 2018. The most notable, and egregious, example is former Acting Comptroller of the Currency Brian Brooks. Prior to joining the OCC in 2020, Brooks was Chief Legal Officer of Coinbase Global, Inc., the largest U.S.-based cryptocurrency exchange. In the eight months Brooks served as Acting Comptroller; he did everything within his power to integrate cryptocurrency into the national banking system. Shortly after resigning as Comptroller, Brooks was tapped to be CEO of crypto exchange Binance.US.
Brooks clearly viewed his public service as an opportunity to benefit the industry whence he came and to which he returned. While I hope that future revolving door cases will not be so flagrant, the practice will surely expand along with the crypto industry. Indeed, the last two years has brought an expanded crypto presence in Washington, D.C. The good news for financial regulators is that they have a new landing pad post-government service. But this may be bad news for the rest of us.
(04/24/2019) High-Frequency Trading Comes to Cryptocurrency, with Marissa Cantu
One of crypto’s great ironies is that for a technology that was founded on the ability for “any two willing parties to transact directly with each other without the need for a trusted third party” the crypto sector is dominated by third parties. This is most evident with crypto exchanges— resembling online brokerages in their user interface and functionality—which is how most people obtain and store crypto. And just like regulated stock exchanges, crypto exchanges are facilitating automated and high frequency treading, which Marissa Cantu and I highlighted in this piece.
For example, in 2018, Coinbase “announced low-latency colocation services would soon be available to institutional investors.” Coinbase provided more information on how they are catering to institutional investors in their S-1, which was filed ahead of their IPO in April 2021.
In the fourth quarter of 2020, institutional trading volume on Coinbase totaled $57 billion, compared to $32 billion in retail trading volume. Given that 96% of Coinbase’s revenue comes from transaction fees, it is clear that institutional trading is Coinbase’s primary revenue driver. Coinbase goes on to note in their S-1 that they assist institutional customers with “advanced trading features, real-time market data, different transaction order types, and smart order routing capabilities.” They even offer “white-glove service” for the execution of complex trades.
It comes as no surprise that Coinbase is offering the same kind of customizable institutional services as traditional securities exchanges; they are a business, after all, and these are profitable activities. What is problematic is that these activities are being offered with zero regulatory oversight. Because crypto is classified as a commodity and the CFTC does not regulate commodity spot markets, crypto exchanges like Coinbase are free from routine oversight of their operations. No one would suggest that the New York Stock Exchange or NASDAQ should be unregulated, so why is this acceptable when it comes to cryptocurrency exchanges?
I suspect that over time, we will learn more about the preferential treatment crypto exchanges are offering institutional investors, like hedge funds and high frequency trading firms. And just like the controversy surrounding payment for order flow that emerged in the wake of the Robinhood and GameStop fiasco, the public may not like what they hear.
(07/02/2019) What Congress Should Ask About Facebook’s New Cryptocurrency
Libra was doomed from the start, and for good reason. In this post, I detailed all the questions I had upon my initial review of the Libra whitepaper and supporting documents. One of things I struggled to understand at first was what was in it for Facebook. After all, Facebook was not the most popular company at the time—nor is it today—and I could see no clear benefits to offset the predictable public scrutiny the project would attract. Facebook did plan on launching a digital wallet to allow users to save, spend, and send Libra, but Facebook never disclosed what the wallet’s transactions fees would be.
Facebook’s true motivations were revealed when David Marcus, the head of Calibra (their digital wallet) and Libra’s co-creator, testified in front of the Senate Banking Committee and the House Financial Services Committee on July 16 and 17, 2019. When asked by Senator Tina Smith (D-MN) what the “long-term business opportunity for Facebook” was, Marcus responded that the primary opportunity was “the ability for the 90 million small businesses and the many users we have on the platform to transact with one another, so as a result, more commerce on the Facebook platform and our family of apps. And if there is more commerce, there will be more advertising revenue for Facebook.”
The upside to Facebook’s ill-fated attempt to launch a global stablecoin was that it forced policymakers to finally take cryptocurrency seriously and assess the adequacy of existing regulatory frameworks for addressing the risks and opportunities presented by crypto.
Libra presented the first credible challenge to sovereign money and it prompted a flurry of new proposals in the U.S. to address the fragmented nature of cryptocurrency regulation. These proposals gained little traction, but I would encourage lawmakers to continue to focus on streamlining cryptocurrency regulation before another big tech company attempts to launch their own cryptocurrency. Public policy is best developed in a deliberate fashion, not in reaction to some news event.
After repeated inquiries and criticism from policymakers and regulators, along with the exit of several Libra Association founding members, Facebook scrapped the original Libra project and rebranded it as Diem in December 2020. The main changes include offering single-currency stablecoins, akin to “digital dollars in a PayPal account,” and switching from a permissionless to a permissioned blockchain. Diem has yet to launch but rest assured the controversy will renew when it does.
(02/24/2021) Beware of the Bitcoin Balance Sheet
Tesla made waves in February 2021 when they announced they had purchased $1.5 billion in Bitcoin and would begin accepting Bitcoin as a form of payment for their products. The waves were just as large when Elon Musk announced Tesla had “suspended vehicle purchases using bitcoin” in May 2021. Maybe Musk reversed himself after reading my post that detailed all the ways it was a bad idea for public companies to put cryptocurrency on their balance sheet. Reason #1: investors can speculate in cryptocurrency on their own. I noted that shareholders buy Tesla stock because they believe the company will successfully produce and sell lots of electric cars, not because they think the company is particularly good at investing in speculative assets like Bitcoin. It has also become clear that cryptocurrencies that rely on the Proof-of-work consensus mechanism, like Bitcoin, utilize tremendous amounts of energy and are not compatible with corporate ESG goals. I am doubtful that we will see large public companies investing in cryptocurrency in the near future, but the crypto sector always finds new ways to surprise you.
(04/06/2021) Restoring Order in Crypto’s Wild West
When it comes to cryptocurrency, several states have begun to experiment with novel regulatory approaches, living up to Louis Brandeis’s idea that states “are the laboratories of democracy.” On one end of the spectrum there is New York, which developed a first-of-its-kind licensing and regulatory regime—the BitLicense—for cryptocurrency companies in 2015. On the other end, there is Wyoming, which, within a span of two years, passed 13 Blockchain-related bills designed to, in the words of one prominent supporter, make it “the only US state to provide a comprehensive, welcoming legal framework that enables Blockchain technology to flourish, both for individuals and companies.”
In this post, I dove into how the legislative process in Wyoming was hijacked by a cryptocurrency lobbyist who went on to form a crypto company that took advantage of the laws she helped create. In 2019, the Wyoming legislature passed HB 74 which authorized the chartering of new special purpose depository institutions (SPDIs) that are permitted to engage in digital asset activities.
Some believe that the main purpose of this new charter is to grant cryptocurrency banks access to the nation’s payments system with a lower level of oversight. For this to happen, the Federal Reserve must be willing to grant master accounts to SPDIs and they had been largely silent on this issue. However, on May 5, 2021, the Fed invited public comment on proposed guidelines to “evaluate request for accounts and services at Federal Reserve Banks.” The guidelines lay out six principles that Reserve Banks would be expected to consider when reviewing requests by institutions for accounts and services. Based upon these principles, it is unclear whether Wyoming SPDIs will be granted a Fed master account. However, some scholars have argued that the Federal Reserve Act should be amended to grant non-bank financial institutions access to Fed master accounts. In fact, the Bank of England adopted such a policy in 2017 when they widened access to Britain’s interbank payments system to fintech firms.
If the crypto sector continues to expand and attract more institutional interest, I expect more states will compete to attract crypto firms and the related jobs. One way in which they can compete is by adopting favorable rules and regulations for cryptocurrency. This could result in a detrimental race to the bottom that allows systemic risk to build up in the financial system unless the federal government intervenes to impose more streamlined regulations; as I believe they should.
Lee Reiners is the Executive Director of the Global Financial Markets Center at Duke Law
Is there any advantage cryptocurrency has over conventional banking that isn’t solely due to its exemption from certain anti-money laundering laws?
For example, advocates will talk about instant money transfer anywhere in the world. If two people have accounts at banks using Zelle, they can do that now; the issue is that our regulations would allow anonymous people to open Stablecoin accounts in wallets (KYC is only required when one redeems them for real money), but generally force banks to identify everyone who opens an account at a US bank.
Some people also cite censorship-resistant transactions for escaping a tyrannical government. Technology does not keep US banks from anonymous offering digital dollar accounts that can be accessed by anyone with the right password (private key) and transferring money; anti-money laundering laws forbid this.
In theory it could make cross-border payments cheaper (Zelle is US only) but most people still rely on some kind of intermediary for their crypto payments. The fees charged by these intermediaries are just as high as Western Union etc.