In the stock market dive, cryptocurrency has lost far more value than the market as a whole, confirming the view that it was mostly a Ponzi scheme all along, enriching the early movers and fleecing the suckers. Not to mention its lack of transparency and the environmental cost of crypto "mining," which consumes vast amounts of electricity.

The mother of all crypto, Bitcoin, lost more than 56 percent of its value in the second quarter. Despite the techno whizbang and hype about easy payment, crypto was created to solve a non-problem, except for scam artists and others with an illicit need to launder money.

Now, just as the whole sector is collapsing of its own weight, here come the Treasury and the Fed to rescue it, perhaps bringing along the House Financial Services Committee with them. The Treasury, and to some extent the Fed, are both played by Nellie Liang, who is undersecretary of the Treasury for domestic finance.

Liang spent most of her career at the Fed. She is an enthusiast of financial "innovation" and relatively gentle regulation, as well as a master of turf consciousness. She has had substantial influence on Janet Yellen, formerly at the Fed, now Treasury secretary.

Liang heads a president’s working group on regulation of stablecoins, a form of crypto that is supposedly guaranteed to hold its value, because it is backed by more traditional forms of actual money (and therefore we need stablecoins why?). For the most part, stablecoins have been used for transactions in other forms of crypto.

Liang’s vision, expressed in testimony and briefings, is that stablecoins could have wider uses in ordinary payments, and have lower costs than, say, credit card payments or Venmo. So far, they have not been used much if at all for that purpose. Liang also supports the idea of non-banks issuing stablecoins as long as they are fully backed by other short-term securities.

Financial press reports and leaks say that the House Financial Services Committee is on the verge of writing a bipartisan bill that follows Liang’s model.

This policy issue combines a philosophical and regulatory argument with a struggle over turf. According to my sources, the agencies that favor tougher regulation, such as the SEC, CFTC, and the FDIC, are wary of the whole approach, as government endorsing the kind of innovation that invites trouble. One person who hasn’t weighed in is Yellen, which makes critics wonder if there is really a unified Treasury position.

Liang’s view is that the Treasury is best positioned to regulate this stuff, for banks and non-banks alike, because it is in charge of "prudential regulation"—capital standards, leverage ratios, and the like. The SEC’s view has been that if it quacks like a security, then it’s a security and the SEC should regulate it.

My view, for what it’s worth—and I was once chief investigator of the Senate Banking Committee—is that the entire crypto sector is mischief, and the last thing it needs is government certification that the wise guys will only circumvent. If the last collapse proves anything, it’s that the financial sector needs simplification, not further complication understood only by insiders.