A History of Financial Technology and Regulation: From US Corporations to Cryptocurrencies and Crowdfunding. 2022. Seth C. Olanberg. Cambridge University Press.
of A History of Financial Technology and Regulation: From US Corporations to Cryptocurrencies and Crowdfunding, Seth C. Olanberg It sheds light on recent changes in the world of finance by exploring the role of technology within it, including complex phenomena such as mutual funds, cryptocurrencies, and the stock market. The chapter begins with historical analogies and ground rules before describing complex digital investment strategies and instruments. Readers will gain an understanding of key concepts in financial regulation, including how laws and regulations prevented financial crises and contributed to other financial crises. The author concludes with thoughts on how financial trends and legislation should respond. This book should appeal to both specialists and generalists interested in learning more about regulation, finance and economics, business, and law.
![subscribe button](https://i0.wp.com/blogs.cfainstitute.org/investor/files/2019/01/Subscribe-Button-1.png?resize=640%2C270)
A legal scholar and professor at the Franklin Pierce School of Law at the University of New Hampshire, Oranberg provides a broad overview of policy initiatives and financial markets to address problems inherent in markets as a result of regulation. In every chapter of the book, the authors develop their views on how financial markets have evolved and how investors and regulators have shaped these developments. A consistent theme throughout the book is that he divides the history of corporate finance in the United States into three distinct eras.
The First Era began with the ratification of the Constitution in the 1790s and ended with the Great Depression in the 1930s. The second era began with his 1933 Securities Act and from 2007 he ended with the 2009 Great Recession. Finally, the third era began with the advent of Bitcoin in 2008 and continues to this day. The author’s basic view is that throughout history, technological developments that facilitate economic opportunities have been directed by the “major players” — wealthy investors and regulators — to benefit the few rather than the many. That’s what it means. He describes recent developments such as the drive to invest in cryptocurrencies as a result of smaller investors desperately seeking higher returns. However, this idea ignores a wide range of investments already available to the public and does not elaborate on investors’ excessive risk-taking in financial markets.
The book describes the limited regulation of “bucket shops” in the late nineteenth century. There, small investors gambled in the stock market, driven by the innovations of Tickernews. A bucket shop is a physical location, usually in an office building, designed to look like a high-end brokerage firm. These institutions, often run by fraudulent owners, put pressure on brokers’ fees and participation limits and contributed to the massive increase in stock ownership in the 1920s.
This increased participation in stock speculation fueled the financial glut of the 1920s. With the crash and severe recession that followed in the 1930s, regulation turned to limit such sources of excess and instability. New Deal-era regulation is presented as an initiative to disenfranchise investors, especially retail investors. This dynamic then set the stage in recent decades for privileged investors such as angels and start-ups to dominate the market.
In summary, rather than constantly trying to create new federal agencies to respond to whatever the next crisis is, the authors urge us to think about alternatives that can protect investors without alienating them. Too much regulation can be dangerous in today’s 3rd era, when smaller investors can easily choose to invest in unregulated assets. We need to think creatively about alternative ways to design optimal regulation so that the future of financial technology will lead to a safer economy and more balanced financial opportunities for all.
If you like this post don’t forget to subscribe enterprising investor.
All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect those of CFA Institute or the author’s employer.
Professional Learning for CFA Institute Members
Members of CFA Institute are empowered to self-determine and self-report the professional study (PL) credits earned, including: enterprising investorMembers can easily record credits using credits. Online PL Tracker.