Crypto's `One-Click Endorphin Loop' Needs to End

The driving force of fintech and our increasingly cashless society has been making payments easier, and faster, everywhere. Startup founders will frequently say their ambition is to make sending money as easy as sending an e-mail — wrapped in the language of “democratizing” finance.

The hitch is that the ability to pay at the touch of a button has also fueled the worst excesses of speculative day trading and gambling-like behavior, from crypto to meme stocks, with 24/7 trading apps’ enticing layouts and loud promotional campaigns by paid influencers making it all as fun and addictive as a game of Candy Crush. “What’s new about this is the one-click endorphin loop,” says Charles Randell, former chairman of the UK Financial Conduct Authority, who says trading apps are exploiting the gap between consumers’ financial capability and financial literacy.

FOMO, Not Fundamentals | Bitcoin's price has gone through several speculative boom-and-busts.

With addiction centers filling up and problem-gambler hotlines ringing off the hook amid a broader normalization of sports betting, and with an estimated 78% of authorized fraud cases originating online, it’s time to consider whether that “Pay Now” button is a speed ramp that needs some guardrails. That’s what some regulators are preparing to do, indirectly, by rolling out new rules requiring a “cooling off” period for certain crypto trades. It’s an idea worth testing.

Starting Oct. 8, first-time crypto buyers in the UK will have to be offered a 24-hour delay between starting a purchase and completing it, as part of proposed tougher crypto advertising rules that also ban referral bonuses. And the European Union’s flagship crypto rules, due to come into force next year, also include a 14-day “right of withdrawal” (similar to existing rules for other online purchases) for consumers who buy tokens that aren’t backed by specific assets or currencies.

A cool-down period to allow time to stop, think, and potentially undo a crypto bet is reminiscent of responsible gambling tools used everywhere from Britain to Australia, and suggests regulators are serious about looking beyond the usual financial toolkit when it comes to crypto’s myriad risks. Despite the sector’s mantra of “Do Your Own Research,” consumer pressure to trade is clearly driven more by FOMO — word of mouth, social media, and the loop of rising prices — than any real analysis. Think of Elon Musk’s Dogecoin tweets or frothy six-figure Bitcoin price targets. A Bank for International Settlements paper recently estimated about three-quarters of retail investors around the world lost money on Bitcoin between 2015 to 2022.