Digital Assets: Regulation and Infrastructure for an Evolving Economy

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 siloed and self-contained, it had far less impact on the broader economy.

This OMFIF report examines the economic opportunities digital assets present, looking at different kinds of digital assets and the possibilities they offer for businesses and individuals to deliver value and generate revenue.

This report also examines the developing legal framework for digital assets. As digital assets grow in importance, the consequences of a repeat of the crypto winter grow more severe. Accordingly, regulators are doing their utmost to develop the regulatory architecture asset required to make the digital assets class into a healthy, safe marketplace. Achieving financial stability, investor protection, and preventing financial crime without degrading the efficiencies and privacy features that digital assets can offer is an immense challenge for regulators.