One of the world’s leading accounting institutions Ernst & Youngexplained that financial services firms need to learn how to manage regulatory issues in crypto markets to stay competitive.
In a new and far-reaching report on the 2022 ‘global regulators outlook’, the firm argued that the recent growth of digital assets and big tech companies means they each need to get into the conversation about more regulation now.
“New players who have traditionally operated outside the regulatory framework… Now they have started to offer financial activities such as payments or loans. These new players are either entering regulatory arbitrage without being subject to full-blown financial services regulation or are subject to much lighter regulation than banks, for example.”
The report also includes financial services firms. crypto assetsHe noted that he needed to keep up with the evolving regulatory landscape regarding the
“A second way the regulatory environment is expanding is to address cryptocurrencies, digital assets, tokens and related products and services. As the adoption and trading volume of these assets increase, there is increasing momentum to address regulatory concerns alongside financial stability and investor protection.”
The key challenge, Ernst & Young says, is that risk assessment and technological innovation often don’t work together, so there’s a need to bridge the gap.
“People who understand risk and regulation often do not significantly overlap with people who understand emerging technologies such as application programming interfaces (APIs), cloud technology, crypto or related solutions.
As a result, many firms need to find capabilities that can sit at the intersection of these areas and facilitate conversations so that risks can be identified and predicted and controls placed.”
The report also states that governments and central banks are beginning to enter the nascent space with the creation of central bank digital currencies (CBDCs).
“Some jurisdictions such as the Bahamas have already introduced CBDCs and some have policy plans (Bank of England and EU) to introduce ongoing experiments (like the US digital dollar) or retail or wholesale CDBCs.”
In December, Mexico announced that its central bank would issue a CBDC by 2024.