Crypto: what could more regulation mean for the future of digital currencies

to dominate because it will be able to offer lower transaction costs.

But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.

And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules
And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.

Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets
As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.

This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments
Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).

Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.

Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial marketsto dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.
to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.to dominate because it will be able to offer lower transaction costs.
But when activity is concentrated in fewer exchanges, more customers are exposed to the risk of any individual crypto provider or large trader failing. And the industry is only becoming more concentrated following recent market failures. Greater concentration means greater risk of contagion.
And over time, decentralised exchanges will be able to become more competitive and lower their transaction costs too. This is in part due to the development of “scaling solutions” – protocols (or sets of rules) that increase activity and transaction speeds without affecting decentralisation. This will also help to bring down the amount investors must pay to validate their transactions on the blockchain, making it less costly to trade.

New rules

And while traditional financial markets are heavily regulated, crypto is not, something that looks likely to change following FTX’s recent difficulties, as well as the events of this year. The importance of developing more official structures for the cryptocurrency market has become even more apparent.
Regulators have already started to investigate FTX lending products and management of customer funds after its collapse. But what else can they do?

1. Closer monitoring of crypto assets

As Binance’s CEO has recently suggested on Twitter (above), one way to prevent a repeat of the FTX failure would be to monitor crypto exchange assets in real time rather than relying on annual reports with (in some cases) gross inaccuracies.
This is already possible. An independent third party can provide “proof of reserves”. This means the organisation publishes audit reports to provide an independent review of the balance sheet of an exchange, tracking the flows of money in and out of investors’ exchange wallets. This would flag up potential systemic failures due to unexpected activity, such as the use of exchange reserves to make loans to crypto firms, as described already with FTX.

2. Better crypto risk assessments

Financial regulators also need to adopt an appropriate risk assessment framework for cryptocurrencies. This should include independent audits and stress-testing of on-chain data (information about transactions on a blockchain network).
Regulations could be imposed to restrict the use of an exchange’s tokens to make loans to crypto firms. More customer protection could also prevent exchanges from suspending withdrawals, leaving traders unable to access money held by an exchange that is in trouble.
Even amid the “crypto winter”, all is not lost for crypto. Appropriate regulations and new models could help the industry to recover and strengthen, perhaps even encouraging further adoption of decentralised finance in mainstream financial markets.







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