The growth in decentralized ownership and control of crypto-assets presents a unique challenge for agencies responsible for maintaining financial stability, oversight, and regulation. In addition to an overview, we pose priority policy questions up for deliberation.
In a short time, the crypto asset ecosystem has grown into a trillion dollar industry, exhibiting the potential to disrupt our global financial system. Unfortunately, crypto assets do not easily fit within the current U.S. regulatory framework and regulators are facing substantial challenges pinpointing imbalances and vulnerabilities. The current lack of regulatory oversight for this market could lead to greater systemic risk and investor harm.
In a previous publication, we outlined key recommendations to advance a national research strategy for crypto assets and also outlined a logic model-based approach for coordinating the development of stablecoin regulations.
In this primer, we focus on the need for better risk controls, which necessitates more granular and frequent assessments of liquidity flows between the crypto and traditional financial markets.