Actions amidst evolving regulation
The market for digital assets has evolved significantly over the past few years, expanding to a market capitalization of more than $3 trillion1 and introducing new assets and technologies, offering several benefits and opportunities, and attracting the global attention of individual investors, financial institutions, central banks, regulators, and legislators.
Digital assets and their underlying technology offer many potential benefits, including:
- Near instantaneous transaction speed, efficiency, and certainty, without geographic limitations
- Automation through smart contracts
- Simplified compliance and enhanced security
- Greater liquidity for assets
- "Democratization" of markets and financial inclusion
The opportunities and potential benefits of digital assets have led to the formation of additional market participants that facilitate the use, trading, and functionality of digital assets, such as dealers, secondary market exchanges, custodians, wallet providers, and repositories, adding further complexity to the digital assets marketplace for regulators to consider.
However, due to the decentralization of the digital asset market, varying product structures, and, in fact, some of the potential benefits described above, regulators have expressed concerns around key risks including:
- Cybersecurity and systems failure
- Compliance with regulatory obligations, including risk management and AML/CFT programs
- Customer due diligence (KYC)
- Accounting and financial reporting
- Tax implications
- Macroprudential economic risk and financial stability
- Resource and energy consumption
For more information, download the full report below.
- Assessing crypto and digital asset risks (PDF/1.3MB)