Getting it right on crypto regulation
BRUSSELS REPORT
Crypto assets are moving into the mainstream. Over the past year their value has exploded and with a number of ambitious initiatives taking place across Asia and the Gulf, digital assets are becoming a financial force to be reckoned with. Can the emerging crypto hubs become role models for European policy makers?
In its most recent report, Thomson Reuters highlighted that between November 2020 and the end of 2021 their value rose from $500 billion to over $3 trillion. More than 16,000 cryptocurrencies are believed to be operating with trading volumes calculated at around $240 billion across 400 trading platforms a day.
The rise of cryptocurrencies has attracted growing government interest on a number of fronts. One is the lack of regulation and oversight, which has made the cryptocurrency market a highly volatile one – one in which regulators have been struggling to manage risks.
At the same time, regulators themselves are facing a risk to be sidelined if they do not manage to get in on the act. Such realization prompted their interest in Central Bank Digital Currencies or CBDCs, a version of cryptocurrency which is backed by a central bank. Just in the past year, ten countries have launched CBDCs, meaning that it will give respective governments a highly desired stake in what might be the financial system of the future.
All this points to growing pressure on governments to establish clear and effective guidelines and regulations.
For now, the process of rolling out adequate regulatory framework has been largely unstructured and slow; where there is regulation, it is patchy and uncoordinated.
