Crypto - Q4 2022
Following another turbulent quarter for cryptoassets markets, key regulatory bodies are continuing to pay keen attention to the space. The price of bitcoin dropped significantly in late 2022, going below $16,000 and currently sitting around 75% below its all-time high price. The collapse of the third largest cryptocurrency exchange, FTX, sent shockwaves through the market, eventually leading to the arrest of its CEO facing an array of fraud and money laundering charges.
Many feared the effects could spread to other exchanges and crash crypto asset-prices further still. However, despite this ‘crypto winter’, cryptoassets do not look to be going away and the UK seems committed to its plans to become a hub for the industry. The Economic Secretary to the Treasury Andrew Griffith spoke to the Treasury Committee on 10 January 2022 of the government plans to adopt Distributed Ledger Technology (DLT), stating "a very wide range of forecasts in the market that reveal the benefits to the UK economy from embracing crypto assets and its underlying technology, such as distributed ledger technology and blockchain".
Below is a summary of key publications from the Governors and Heads of Supervision, UK Finance, the Financial Stability Board and the European Securities and markets Authority. The key takeaways are as follows:
- Volatility in the market continues, with contagion effects inside the market.
- As cryptoassets become a more mainstream investment, including for institutional investors and exposures via products like ETFs, there is a risk for contagion effects to traditional financial markets.
- Traditional regulation provides a strong base for building cryptoasset regulation, and scopes could be widened to include cryptoassets.
- Tailored and purpose-built regulation is needed in places to harness innovation and potential benefits offered by DLT.
- Operational and cyber risks are key and could be severe for cryptoassets
Given the above, key bodies are continuing the push for regulation of cryptoassets to protect financial stability and individual consumers.
For a more comprehensive review on this topic, please click on the pdf below:
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