Crypto winter is here, but will it end?

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SINGAPORE: The cryptocurrency ecosystem – which has taken a beating after hitting euphoric highs last year – is set to be more regulated in the future, forcing players to be more diligent in following the rules, a said an observer.

Over the past year, cryptocurrency prices have crashed, major players have fallen and investors are withdrawing funds in one of the harshest crypto winters ever, fueling fears that problems of the crypto sphere does not even trickle down to more traditional assets.

One of the reasons we have such contagion in crypto is because there is no lender of last resort and without a lender of last resort, the contagion is heading into the system without interruption, Mr. Paul Brody, global blockchain leader at a professional services firm. EY, Tuesday (December 20).

I expect we will not only see a much more regulated crypto ecosystem, but we will see a crypto ecosystem with frankly a lot less crypto and a lot more stablecoins.

Stablecoins are designed to have a stable value, usually by being backed or pegged to an underlying asset such as a currency.

A MORE DILIGENT CRYPTO SPACE

Citing Japan as a benchmark, Brody said he has a tough regime — after the collapse of Tokyo-based bitcoin exchange Mt. Gox — that depends not just on corporate behavior, but also on the government inspection and the requirement of third-party auditors”.

I think we’re going to see more regulation or a regulatory environment that’s more like Japan, with a requirement for third-party inspection to be in this business, he told CNA Asia Tonight.

I think we want a much more diligent crypto industry coming out of this. I hope to see that, and it will be very good for the industry.

Cryptocurrency prices are down more than 50% from their all-time highs last year, and trading volumes have declined. The fall of stablecoin TerraUSD and sister coin Luna in May triggered a domino effect that saw investors lose billions of dollars globally.

The arrest of FTX founder Sam Bankman-Fried last week for alleged mismanagement of funds that saw his now bankrupt cryptocurrency exchange collapse capped a tough year for the industry.

One of the big problems we’re having right now is that normally in any type of meltdown you have something that people talk about as a leak to quality. Investors are looking for the most stable, mature and well-regulated player, Brody said.

And what they’re looking at and finding out is that there are very, very few publicly traded, deeply regulated and comprehensively audited players, and that actually, I think, has a negative impact on that .

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