Crypto reg far more bankable, certified

The sentencing of FTX founder Sam Bankman-Fried for fraud and money laundering sends an unambiguous message that the US is ready to go the distance in regulating cryptocurrencies. In addition to charges against Binance founder Changpeng Zhao of operating unregistered exchanges and selling unregistered securities, the US has gone further than most other countries in taming some of the most blatant abuses in the crypto world. As coordinated global regulation is being designed, the US enforcement actions will smoothen the journey of crypto assets from illegal tender to an orderly asset class. This is good news for investors who have resumed their interest in cryptos after the spectacular blowouts at FTX and Binance.

Bitcoin regained its trillion dollar market capitalisation earlier this year with investors in the US gaining access to the cryptocurrency through exchange traded funds (ETFs). Bitcoin has climbed to a new lifetime peak in anticipation of its next halving in April, in a process to control supply of the cryptocurrency. The crypto market has taken the conviction of Bankman-Fried in its stride with little impact on prices across a basket of most traded coins. This is a positive for deepening the crypto market with reduced scope for manipulation. With governments issuing more rules on risk regulation, cryptos should be on their way to becoming a store of value in a financial structure that is becoming decentralised.

Central banks will, of course, have to put in place safeguards to threats cryptos pose to financial stability. Fiat digital currency that central banks are testing address some of the issues with cryptos such as their lack of underlying value. Mainstreaming of cryptos through tough enforcement and a broader acceptance as legal tender will widen their appeal for transaction, investment and hedging. Licensing requirements for issuers and intermediaries, and designated status for cryptocurrencies should unleash their potential as an asset class that serves investors and governments.