The uncertain prudential treatment of cryptoassets

Lee Reiners

Contents

Foreword

Preface

Preface

Introduction: Suptech/regtech defined: Payments, sandboxes and beyond

1.

The uncertain prudential treatment of cryptoassets

2.

US regulatory certainty versus uncertainty for crypto and blockchain

3.

Bermuda: Suptech and regtech supporting the risk-based approach

4.

Suptech: A new era of supervisory philosophy

5.

Cloud computing in the financial sector: A global perspective

6.

DeFi protocol risks: The paradox of cryptofinance

7.

IT transformation in the Prudential Authority of South Africa: A case study

8.

Making the vision a reality: Perspectives from the Monetary Authority of Singapore

9.

Lessons from Hong Kong through the lens of the HKMA

10.

Technological change: Is it different this time?

11.

The ECB’s suptech innovation house: Paving the way for digital transformation of banking supervision

12.

China’s financing opening up and regulatory convergence with the world

13.

Disclosures and market discipline: The promise of regtech

14.

Regtech and new derivatives developments

15.

Fintech and regtech: Leading the evolution and regulation of alternative investments

16.

The role of artificial intelligence and big data in investment management

17.

The promise and challenges of machine learning in finance

18.

Data privacy and alternative data

19.

Digital ID and financial inclusion

20.

Strategic technology: Regulation and innovation of CBDCs

21.

Regulatory sandboxes: Innovation and financial inclusion

22.

Technology and sandbox development innovation in a transitional market: A case study

23.

Developing the regulatory ecosystem: The evolution of stablecoin

24.

Central bank digital currency, regtech and suptech

25.

Digital dollar: Cryptocurrency for everyday commerce

26.

CFTC regtech implications for virtual currency trading

27.

Fintech, regtech, suptech and central bank decision making

For over a decade after Satoshi Nakamoto released his famous Bitcoin white paper in 2008, cryptocurrency and its progeny, such as stablecoins and digital asset tokens, were isolated from the traditional financial sector and were an asset class unto itself. However, slowly at first, the boundary between the cryptoasset sector and the legacy financial system began to blur, eventually reaching a point that the boundary was hardly visible.

Several key events catalysed crypto-asset integration in the US: the decision of the Commodity Futures Trading Commission (CFTC) in 2015 to classify Bitcoin as a commodity and the subsequent decision to permit the listing of cash-settled Bitcoin futures contracts in December 2017; the establishment of a first-of-its-kind state licensing regime for cryptocurrency firms (the BitLicense) by the New York Department of Financial Services in 2015 (Reiners, 2017); PayPal’s announcement in 2020 that they would allow customers to buy, hold and sell cryptocurrency directly from their PayPal account (PayPal, 2021); and Tesla’s revelation in early 2021 that they had bought US$1.5 billion in Bitcoin and began accepting it as payment (Brodkin, 2021). Despite

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