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Addressing the risks in crypto: laying out the options

BIS Bulletin | No 66 | 12 January 2023 by Matteo Aquilina, Jon Frost and Andreas Schrimpf PDF full text 

  • The recent high-profile failures of FTX and other crypto firms have re-ignited the debate on the appropriate policy response to address the risks in crypto, including through regulation.
  • The “shadow financial” functions enabled by crypto markets share many of the vulnerabilities of traditional finance. These risks are exacerbated by specific features of crypto.
  • Authorities may consider different – not mutually exclusive – lines of action to tackle the risks in crypto. These include containment or regulation of the crypto sector or an outright ban.
  • Central banks and public authorities could also work to make TradFi more attractive. A key option is to encourage sound innovation with central bank digital currencies (CBDCs).

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