Greater Fool Theory
Fools are everywhere, especially with the Internet around. A term used in investing, the Greater Fool Theory is an idea that suggests one can make money by purchasing overvalued assets from another person, particularly a greater fool. This has been tested to happen in reality, time and time again. With people relying less on actual statistics, and more on hype and what is trending, it is easier to make fools out of everyone, targeting those with more money and discretion.
We saw this most recently with the collapse of the FTX cryptocurrency exchange, said to be worth $32 billion at a time, or P1.7 trillion, to next to nothing, in a matter of weeks. FTX is among the largest crypto exchanges worldwide, with its 30-year-old CEO, Sam Bankman-Fried, labeled as the savior of cryptocurrencies. Unfortunately, that same person has now reportedly fled US jurisdiction out of fear of being arrested, with allegations of making unauthorized fund transfers, amounting to billions, from FTX to another sister company.
The BSP has issued a stern warning on this matter. BSP Governor Felipe Medalla, in a message to the media, reminded how he has repeatedly stated that cryptocurrencies are risky. True enough, the Philippines has been treading very carefully on this aspect. We are conservative when it comes to finances, and belts are naturally tightened when it comes to these sophisticated investments. This brings to question however why Ponzi schemes are still prevalent in certain segments.
A word of caution though — I have never owned crypto and any digital money in any form mainly because of the Greater Fool Theory, so I am writing this from the perspective of a spectator, although I have great concern for my friends who are invested in cryptocurrencies, which are traded online. Digital currencies have no tangible form. There have been efforts to make it as useful as online money, but other application platforms (i.e., GCash, Maya) have taken the lead on this.
Perhaps a new regulator can keep a watchful eye on these online activities. Among the legislative priorities of President Bongbong Marcos Jr., the formation of an E-Commerce Bureau took a step forward the other day with its approval before the Appropriations Committee of the House of Representatives. Earlier, the House Committee on Trade and Industry unanimously approved the same bill on August 24. The E-Commerce Bureau will be under the Department of Trade and Industry, and tasked to oversee the growth and regulation of the online e-commerce industry that is not yet regulated by other government offices.
It appears that crypto exchanges may be covered by this bill if passed into law.
In a press statement, Valenzuela Rep.
Wes Gatchalian, Chairman of the Committee of Trade and Industry, said the proposed bill seeks to regulate all business -to-business and business -to-consumer commercial transactions conducted over the internet, including those related to internet retail, online travel services, digital media providers, ride-hailing services and digital financial services. The question arises on how jurisdiction may be acquired over companies that are located abroad, but operate globally through the Internet, which pretty much pertains to most websites we frequent on the web.
Having a central help desk for consumer concerns relating to fraud or unfair commercial practices online would address the needs of Filipinos active in e-commerce. The country is on the right track in creating an office to monitor online activities but regulating it may be a different story.
“We saw this most recently with the collapse of the FTX cryptocurrency exchange, said to be worth $32 billion at a time, or P1.7 trillion, to next to nothing, in a matter of weeks.
“The question arises on how jurisdiction may be acquired over companies that are located abroad, but operate globally through the Internet, which pretty much pertains to most websites we frequent on the web.