• The current environment surrounding cryptocurrencies is an existential threat to digital assets and traditional market participants.
• Before the FTX crypto exchange’s collapse, most Americans were vaguely aware of digital assets, but now the industry needs to take steps to prevent a crypto winter from becoming an ice age.
• Industry should recognize that crypto has to be regulated as part of the regular economy and argue for rules tailored to its unique innovations.
The cryptocurrency industry is facing its greatest challenge since its inception. The recent collapse of the FTX crypto exchange has prompted a wave of scrutiny from the public and from lawmakers in Congress, leading to an environment that represents an existential threat to digital assets and traditional market participants.
Before the FTX crypto exchange’s collapse, most Americans were vaguely aware of digital assets. A small number held cryptocurrencies, others had relatives or friends who dabbled in it, and many more saw commercials for it during last year’s Super Bowl or other sporting events. However, as the industry has come under more intense scrutiny, it has become apparent that the only way to prevent a crypto winter from becoming an ice age is for industry to take a proactive approach to ensure that digital assets are regulated in a responsible and fair manner.
The first step in this process is for industry to recognize that crypto has to be regulated as part of the regular economy. While the decentralized nature of digital assets has traditionally been seen as a benefit, the reality is that in order for the industry to remain viable, it will need to accept and comply with the same regulations that govern other financial markets. This means that industry should be advocating for rules tailored to its unique innovations.
For example, industry should be advocating for regulations that allow for the development of market infrastructure that is tailored to the unique needs of digital assets, such as decentralized exchanges and custodial services. Additionally, regulators should be encouraged to create rules that address the potential risks associated with digital assets, such as market manipulation, insider trading, and cyber security. Lastly, the industry should be advocating for a regulatory framework that allows for the innovation of new products and services that can capitalize on the opportunities that crypto presents.
By taking these steps, the industry can show that it is committed to responsible regulation and demonstrate that digital assets can be regulated in a manner that is beneficial to all market participants. Ultimately, this will be the only way to ensure that the crypto winter doesn’t become an ice age.