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What's next for crypto?

Author

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  • Claudia Biancotti

    (Bank of Italy)

Abstract

The crypto world is at a turning point. In the spring of 2022, idiosyncratic weaknesses and adverse macro conditions combined to precipitate a major crisis. Is this the end of crypto? Not necessarily. As bad projects fall by the wayside, the industry is being pushed to find technical solutions that will restore public trust and deliver better performances. At the same time, key jurisdictions around the world are deploying regulations that will make the sector more orderly. Innovation and legal certainty may be the twin foundations upon which crypto flourishes, provided that regulators and the industry cooperate constructively and creatively. This will not always be easy, as crypto culture and any legal framework are at odds in some domains. The main examples are: tokens that do not embed claims on any entity, anonymity, and censorship resistance, i.e. the technical impossibility of blocking transactions on permissionless blockchains. Achieving a compromise on many facets of these problems looks possible, while for others, the authorities may have to prohibit behaviour that some crypto enthusiasts consider to be non-negotiable.

Suggested Citation

  • Claudia Biancotti, 2022. "What's next for crypto?," Questioni di Economia e Finanza (Occasional Papers) 711, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_711_22
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2022-0711/QEF_711_22.pdf
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    More about this item

    Keywords

    Crypto-assets; financial regulation; blockchain;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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