Cryptos have been blowing hot and cold for many years in the financial markets. Between historic increases and considerable price declines, digital assets never cease to amaze. Faced with these changes, the Bank of Italy decided to analyze the key factors needed by the industry, in particular regulation, investor interest and decentralization.
The crypto market and its turbulence: a growing ecosystem but not without risks
Cryptocurrencies continue their way despite everything, even if the journey has not always been easy. Indeed, the crypto sector has faced a lot of turbulence in almost fourteen years of existence. The Bank of Italy recently published a report that highlights the new challenges of the blockchain after the bear market.
Since the advent of bitcoin (BTC) and all cryptos in general, many people see them as the ultimate source of income. Indeed, they have proven themselves during the Covid-19 pandemic and during the invasion of Russia in Ukraine. However, with the bull runs, the market also experienced impressive price declines during which most assets lost more than half of their value. In such an uncertain context, regulation is essential.
Is regulation the solution to avoid risks?
Regulators usually keep an eye on developments in cryptocurrencies. Since the launch of the Bitcoin blockchain in 2009, they have been aware of what is happening in the ecosystem. However, if the question of the regulation of cryptocurrencies often arises, the problem comes from international regulators who are not always of the same opinion.
In Europe and the United States, regulation is slowly being imposed on the ecosystem. But according to the Bank of Italy, this is not enough, since the ideas are still not homogeneous.
Ultimately, the Bank of Italy believes that real regulation is needed on the crypto market to mitigate crises like those that occurred last year. According to her, we should think first and foremost of investors who are subject to volatility. Digital assets know no borders. As a result, all the competent authorities should work together without, however, hampering the action of the supervisory authorities. And the ongoing work between the FSB, BCBS, IOSCO and the CPMI pretty much shows the new dimension that regulation will take.
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