Reviews | Why America Should Ban Crypto

All of this wild, woolly capitalism sounds a lot like that described in a remark often attributed to Mark Twain, who said that “a mine is a hole in the ground with a liar above it.”

These lamentable excesses have continued because there is a regulatory vacuum. A cryptocurrency is not a currency, nor a commodity, nor a security. Instead, it’s a gambling contract with a nearly 100% house advantage, made in a country where gambling contracts have traditionally been regulated only by states that compete for laxity. Clearly, the United States should now enact new federal law that prevents this from happening.

Two interesting precedents can guide us to wise action. In the first precedent, the Chinese communist government recently banned cryptocurrencies because it wisely concluded that they would do more harm than good. And, in the second precedent, from the early 1700s, England reacted to a horrible depression following the explosion of a promotional scheme to obtain huge profits by using slow sailing ships to trade with very poor on the other side of the world.

What the English Parliament did in its anguish when this mad promotion exploded was straightforward and simple: It banned all public trading in new ordinary shares and kept that ban in place for about 100 years. And, in those 100 years, England has made by far the greatest national contribution to the march of civilization, for it strongly led both the Enlightenment and the Industrial Revolution and, to boot, spawned a promising little country called the United States.

What should the US do after a cryptocurrency ban is in place? Well, one more action might make sense: to thank the Chinese Communist leader for his magnificent example of uncommon common sense.

Mr. Munger is Vice Chairman of Berkshire Hathaway.