A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding by Seth C. Oranburg

Abstract

Reviewed by: A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding by Seth C. Oranburg Florian Vetter (bio) A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding By Seth C. Oranburg. Cambridge: Cambridge University Press, 2022. Pp. 200. This book is an important contribution for financial historians insofar as it shifts away from a purely institutional perspective. At first glance, Seth C. Oranburg's work appears to reconstruct the milestones of the regulations of the U.S. financial markets and their transformation through the introduction of technology. However, a closer reading reveals that the author focuses on a large panorama of actors such as investors, state institutions, financial institutions, and small investors. In doing so, Oranburg highlights that ordinary investors and small businesses are often left behind when it comes to investing. He argues that today's regulatory apparatus in America is incredibly cost intensive for the taxpayer, leads to disparities in wealth, and makes it almost unprofitable for new actors to enter financial markets. Oranburg's book distinguishes itself from other works of financial history by its analysis of the intertwining of regulation and technology. The author bases his arguments mainly on current literature, quotations, advertisements, and photographs. The work covers the period between the 1790s and 2020. After a brief introduction, Oranburg introduces the key concepts of financial regulation and digital investment strategies in eleven chapters. The book focused on the intertwining of technology, regulation, and various actors within the American financial market. In addition, Oranburg demonstrates how laws and regulations prevented financial crises but also caused them. The history of corporate finance and financial markets in the United States is described across three epochs. The author shows that the first era (1790s–1930s) was characterized by capitalism and individualism. It becomes clear that between the 1790s and 1930s, the United States consisted of many unconnected financial markets. However, the advent of technologies such as the railway or the telegraph helped the individual states to grow together into an economic union. Consequently, the advent of technology led to the fact that financial crises took place on a national scale in the United States. The second era (1933–2008), according to the author, was characterized by a centralized command and control approach to securities regulation. Furthermore, the Great Depression had a significant impact on political and economic change in the United States. Here, Oranburg describes how the U.S. government created new federal agencies to counteract inflation after Franklin Delano Roosevelt became president. The Securities and Exchange Commission (SEC) serves here as a case study to demonstrate how the growing federal bureaucracy became increasingly costly for the taxpayer. Thus, it becomes clear that the international crisis also led to centralization and consolidation [End Page 615] in the United States. As a result, New York rose to prominence as a financial center. Silicon Valley started to flourish as investors began to invest in new companies and start-ups instead of publicly listed companies. During this period, America's middle class also began to benefit from these regulations and changes as corporate profits seemed to flow into a growing middle class. From the 1990s onward, Oranburg highlights a fundamental change in investment. Until this time, stocks were primarily owned by large corporations rather than individuals. The author concludes this period with the dot-com era (mid-1990s–2000s) and illustrates through the resulting financial crisis in 2000 how domestic stock markets were reregulated to prevent further crises. In the third era (2008–20), Oranburg uses Bitcoin, social media activism, decentralized finance, and crowdfunding as case studies to show how financial regulation has fallen far behind financial technology. In doing so, he skillfully builds a bridge from the Great Depression to the digital age. He demonstrates that federal laws to regulate communication about investment opportunities from the beginning of the twentieth century are now no longer applicable. Oranburg has managed to write a book that offers financial historians as well as nonspecialists new perspectives. By adding simplified examples of economic theory in each chapter, the book serves as a good introduction for readers outside the field of financial history. These examples help...