I’ve spent decades studying trust in markets. Here’s what the FTX collapse has in common with Lehman Brothers and Russian nukes

(Credit: Chip Somodevilla - Getty Images)

Following the recent collapse of FTX, it’s time to repurpose an old Reagan-era phrase: “Trust, but verify.” First used in the context of Cold War nuclear arms diplomacy, the phrase now applies to today’s cryptocurrency markets, which have exposed small investors to disproportionately high risk.

The federal government is at a crossroads, facing two possibilities: They can either continue on the current path and keep the door open to more instability or regulate crypto, potentially lending legitimacy to a novel financial product–but also putting it through a stress test that will require it to demonstrate that its much-touted merits can stand up to scrutiny.