With the collapse of FTX in November 2022 bringing to the forefront the need for regulation in the crypto industry, both policymakers and the financial sector are left asking how a virtual asset, existing only on a borderless blockchain ledger, can be truly regulated. Likewise, if crypto is designed to be inherently decentralised, how can it be regulated by central agencies? As with all emerging technologies and new financial instruments, we remain trapped between enabling innovation and protecting the public. Cryptocurrency, stablecoins, and NFTs went swiftly from being a fringe novelty to becoming widely adopted and intertwined with mainstream financial markets, presenting lawmakers with a problem they don’t fully understand. With the disintegration of FTX, as well as the unprecedented decline of the Terra stablecoin, 2022 saw a series of hyper-profile events within the cryptocurrency market that demonstrated the immediate need for significant regulatory oversight. Rival interests are seeking to answer questions about what we want the fundamental nature of digital assets to be. Are they securities or commodities? Should cryptocurrencies, which have no physical token, behave like the US dollar and other fiat currencies? Will regulations put an end to crypto’s potential for unprecedented financial inclusion?
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