Michael Lewis believes that cryptocurrency has the potential to make or break the financial system

According to Michael Lewis, author of “The Big Short,” the decentralized structure of cryptocurrencies is altering the traditional financial sector, but there is still a lot of uncertainty in the space.

Lewis told Yahoo on Wednesday that “a different financial system is being constructed alongside the existing legacy financial framework, and it eliminates middlemen.”

Because of the rise of decentralized finance and bitcoin, the Securities and Exchange Commission now regulates a smaller share of the financial system, according to Lewis.

He added that retail traders on crypto exchanges today deal directly with the exchange, rather than a broker, which helps level the playing field for everyday investors.

So far, Lewis said the cryptocurrency model has proven that it can be effective as a market, and the traditional financial system may look to parts of crypto to improve its own framework. Decentralized finance may “end up being persuasive” in reforming legacy finance, he noted.

“The mechanisms that are being built …are far more egalitarian, more equal,” he said. “The participants in the marketplace are not privileged in relation to one another in the same way they are in the stock market.”

But, like the dollar and gold, Lewis pointed out that cryptocurrency is based on faith, and there’s no telling how long people can sustain that faith for a relatively new technology.

“The whole thing may come crashing down,” Lewis said. “But the longer it goes on, the more of a threat it poses to the existing financial order.”

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• Michael Lewis believes that cryptocurrency has the potential to make or break the financial system
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