![]() Regulation is shaping up to be a defining feature of the crypto ecosystem over the next two years. And policymakers will have to contend with a difficult macro and geopolitical context, as well as some unique features attendant to this emerging ecosystem. But as the market thaws, there will likely continue to be key differences between policymakers. The significant losses caused by the recent rout appears to have toughened the regulatory resolve of even some of the more crypto-friendly authorities. The policy stance will vary, and legislation may move at different speeds and in different directions between regions. Key priorities for policymakers will likely include consumer protection, financial stability, market conduct, and anti-money laundering rules, while also striking a balance that enables and fosters continued innovation in the financial markets. Reduced asset prices and activity may offer only a temporary reprieve from the urgency of the regulatory task. As a result, it has sharpened policymakers' awareness of the need to regulate the crypto and decentralized finance (DeFi) ecosystem. The “crypto winter” and related collapse of some projects and crypto assets have prompted significant losses, exposed idiosyncratic risks and vulnerabilities within protocols, and highlighted systemic concerns within the crypto landscape. Evolving regulations will define the future shape of the crypto ecosystem over the next two years.
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