Crypto

Crypto bank failures fuel regulatory debate

The global cryptocurrency industry has been hit by high-profile setbacks, scandals and failures in recent months, sparking a regulatory rush to protect consumers from fraud and scams.

Global finance was rocked by the collapse of Silicon Valley Bank last week, and the digital currency sector was hit hard by the demise of US crypto lenders Silvergate and Signature – just months after the platform went bankrupt. -form of FTX troubled crypto exchange trading.

Regulators are increasingly keen to monitor a sector that exploded during the Covid pandemic when many people were stuck at home.

The global crypto market stands at over $1 trillion and has been growing strongly in recent months, although it remains well below its 2021 peak of $3 trillion.

– ‘Huge risks’ – The number of crypto customers “has increased during the Covid shutdowns,” Martin Walker, head of banking at the Netherlands-based Center for Evidence-Based Management, told AFP.

“They joined an unregulated market, investing with huge risk but not realizing they were investing in unregulated and not (still) legal assets,” said Walker, who hosted a conference in London last year. on reviews of cryptocurrency.

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He argued that the trading platforms were in conflict due to their unique position. “They have conflicts of interest (…) as the owners at the same time take risky positions in crypto and sell those assets to their consumers,” Walker added.

“People don’t realize that’s not allowed in conventional finance.”

Regulators also want oversight of these platforms because they connect customers, regardless of experience or knowledge, to the complex world of cryptocurrency.

These trading platforms are the “link between what would be a technically very complex world, both financially and technologically, with a poorly trained and poorly informed population”, explains to AFP Ludovic Desmedt, professor of economics at the University of Burgundy.

Additionally, cryptocurrencies can experience volatile price fluctuations and their value is not determined by transparent markets, as is the case with currencies, stocks or traditional commodities.

As a result, illicit transactions using cryptocurrencies more than doubled last year to nearly $21 billion, according to crypto firm Chainalysis.

However, this estimate does not include certain illegal uses such as drug trafficking.

– Crackdown – Officials in the US are working on a framework to oversee crypto firms, but in September the White House asked regulators to use similar regulatory rules that apply to other service providers financial.

As a result, market regulator the Securities and Exchange Commission (SEC) filed a lawsuit against crypto lenders Genesis and Gemini.

And in February, the SEC ordered crypto firm Paxos Trust to stop issuing the dollar-pegged cryptocurrency BUSD, a stablecoin, for the world’s largest trading platform, Binance.

The European Union bills, which are due to come into effect next year, will require crypto platforms to be more rigorous and transparent in their operations.

In Britain, the government launched a consultation this year to set out a regulatory framework for the sector as it seeks to avoid being left behind by the EU and US.

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