#cryptocurrency should be kept out of the mainstream economy.
I could be entirely wrong, but let me explain.
By June of 2022, the #crypto market saw its consolidated market cap reduce by 66%. Current value is close to $1 trillion but it was ~$3 trillion around 6 months ago. A lot of people, and organisations were impacted in the crash, many lost money and many lost a lot more than that.
While we are talking about market crashes, lets consider a few other contenders for comparison, the dot com crash in the 1990’s saw a reduction of ~50% market value for tech firms. In the 90’s the world was still relatively disconnected and globalisation was just around the corner.
The 2008 housing market crash was global in nature, probably because of “globalisation”. Organisations and economies were connected, the crash of the US housing market had a ripple effect across the world, leading to a global economic crisis.
A slight disconnect, sometimes can prevent systemic failures and thus I believe that the #crypto markets should have boundaries.
* A decoupled crypto market with a minimal effect on mainstream economies could prevent the impact of the unprecedented speculative nature of these commodities/digital assets/currencies on the global economies.
* A strong regulatory framework to let the crypto market and the extended #web3 ecosystem flourish is essential. Let these be grounds for unimaginable innovation, the likes of which the world has never seen.
Crypto regulations today are scattered at best.
US considers #cryptocurrencies as #commodities and not securities and are handled by Commodity Futures Trading Commission (CFTC) and not the U.S. Securities and Exchange Commission. These regulators are ramping up as we speak.
The FED have issued statements citing migration of risk from crypto assets to the traditional banking infrastructure. The US Federal regulators, issued a joint statement, citing risks and safe practices in the crypto asset related transactions.
* An important fact about decentralized finance, which I believe gets ignored among all the optimism is the impact that it may have on a very fragile traditional centralized infrastructure, if the risks are migrated.
* Crypto assets transactions; issuing, transfers etc. do not undergo the same level of scrutiny as a traditional high value transaction. If these assets are to migrate into the traditional infrastructure, it could wreak havoc, so the risk is very real.
* Interesting thing to notice is that the tone of the statement by the regulators is not all dark, it seems like the general approach is not entirely negative. Grey is a good start for a more inclusive financial infrastructure.
If anything, the year 2022 should be an essential lesson in the path ahead for decentralized, centralized infrastructures and everything in between.
Europe recently agreed on comprehensive crypto regulations; Markets in Crypto-Assets (MiCA), more to come.
In Asia, India is vague about crypto and China and Japan are at extreme ends of the spectrum. China has all in all declared cryptocurrencies as illegal tender. and Japan is hiring ministers to manage regulations for Web3.
* A gradual transition of the two parallel economies, on the merit of value they bring and problems they solve(both, the ones we know and the ones we don’t know yet).
One might say that this is not a very innovative approach, but every problem today was once considered a solution, so jumping on to the next shiny thing sounds good but it has consequences and mitigating these risks should be the regulators priority.