Robust regulation key to limiting fallout from repeat of crypto winter

OMFIF’s ‘Digital assets’ report examines the economic opportunities the new asset class presents

 
The world of digital assets is still reeling from the ‘crypto winter’ — a huge collapse in asset valuations in early 2022 triggered by the failure of a major stablecoin, resulting in the insolvency of some institutions.

The episode shared many of the characteristics of the global financial crisis — hubris around high-yielding, purportedly low-risk strategies, excessive leverage and systemic risk because of institutions’ mutual exposure. Mercifully, it was on a smaller scale and, since the digital assets industry is fairly self-contained, it had far less impact on the broader economy.

But the crypto winter has done little to dampen the dynamism of the sector and, while valuations are still down, innovation and development continue apace. The possibilities for new models of economic activity enabled by a digital asset ecosystem are still as exciting to businesses and creators, even though the speculative froth of a $2.8tn market capitalisation has been blown away.

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Πηγή: omfif.org