A recent government report claims crypto assets have not lowered costs for financial services, particularly payments, and are prone to manipulation and theft.
This year’s crypto winter and the sharp market rout that followed have prompted a great deal of soul-searching among the regulators of the world, along with sharply increased scrutiny of market activity.
Draft measures are now afoot in many jurisdictions, including the EU and US. In Asia, the Monetary Authority of Singapore (MAS) is looking at further curbs, as finews.asia previously indicated, while Hong Kong is currently pushing through anti-money laundering legislation to contend with virtual asset providers.
But - until now – nobody, at least on the regulatory side, has really managed to succinctly put their finger on what is actually wrong with the broader ecosystem.
High Costs
That is, until last Friday when the US Under Secretary for Domestic Finance Nellie Liang held a talk at the Brookings Institution, a Washington DC-based public policy organization.
At the event, she discussed how crypto assets are being used and what their potential impact is on the most vulnerable parts of society based on the conclusions of a recent Treasury report.
According to her, they are solely used for trading and lending, and rarely for other financial services. Importantly, and counter to what many crypto providers might have us believe, they have not made payments faster, cut the number of middlemen involved, or lowered costs.
Improper Conduct
She also highlighted what she termed significant areas of concern, including «frequent instances» of operational failure, market manipulation, fraud, and theft - as well as scams. This exposes both consumers and investors to improper conduct, little transparency, and a lack of compliance with existing regulations, not to mention the new and rapidly developing applications.
«In addition, while the data for populations vulnerable to disparate impacts remains limited, available evidence suggests that crypto-asset products may present heightened risks to these groups, and little evidence of financial inclusion benefits,» Liang stated.
Given the findings, the Treasury will continue to pursue enforcement efforts related to crypto assets and clarify existing authorities, subjecting them to the principle that all financial services, whether crypto or not, should be subject to the same rules, regardless of technology.
