The Economic Survey gauged for the necessity to regulate cryptocurrency or the crypto ecosystem. Further the International fora like Organisation for Economic Co-operation and Development (OECD) and G20 are discussing a globally coordinated approach to regulating crypto assets.
The recent collapse of the crypto exchange FTX and the ensuing sell-off in the crypto markets have placed a spotlight on the vulnerabilities in the crypto ecosystem.
Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because they have no intrinsic cash flows attached to them. US regulators have disqualified Bitcoin, Ether and various other crypto assets as securities.
A rare joint statement by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) on 3rd January 2023 highlighted their concerns about crypto-asset risks to the banking system.
Monitoring and regulating cryptocurrencies have been tricky, and regulators across the globe find it challenging to keep track of the new and emerging issues in the fast-moving uncharted field.
While crypto assets were apparently designed to disintermediate traditional financial services, this has created new unregulated intermediating entities.
The phrase “crypto asset” itself refers to a wide range of digital products that, depending on their real or intended purpose, may require the attention of several state regulators. The study discovered that a variety of crypto players, including miners, validators, and protocol authors, would not be easily covered by conventional financial regulation.
According to the survey, the value of all crypto assets has fluctuated greatly, from approximately US$ 3 trillion in November 2021 to less than US$ 1 trillion in January 2023.
Further, the weak governance and backing of the crypto asset ecosystem, as well as the growing complexity and lack of transparency, have all been brought to light by the network’s volatility.
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