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COMMENTARY — Jan 09, 2023
Cryptocurrencies reached all-time highs in November of 2021 (eclipsing 2.8 Trillion in total market cap) before falling more than 70% in 2022 as the digital asset sector was rocked by a series of failures, bankruptcies, and potentially criminal misconduct. As investors and institutions seek to regroup after a year of unprecedented volatility, they continue to face an uncertain path with little regulation. The enhanced enforcement response only heightens this uncertainty as American and global regulator respond to the FTX collapse.
Looking forward to 2023, firms are compelled to make decisions on how to comply with a complex set of rules around Know Your Customer (KYC), tax and Third-Party Risk Management (TPRM) based on their unique understanding of complex settlements and court filings by a variety of federal, state, and international regulators. This is complicated by ongoing legal uncertainty in the U.S. around fundamental questions such as whether a particular digital asset is a security or a commodity. Tasked with operating in this environment, firms must seek out regulatory certainty wherever they can find it.
The FTX collapse highlighted the risk of operating in a foreign jurisdiction - the Bahamas - with a lax regulatory infrastructure. In the future, investors will likely seek the reassurance of dealing with a licensed company in a jurisdiction (such as the US, EU, or Japan) with robust regulatory reporting and risk management standards to restore trust.
Despite market and regulatory uncertainty, firms should look at automated workflow solutions that address current and future headwinds and help firms to:
For industry insights and expertise to navigate cryptocurrency with confidence. Learn more
S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.