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Crypto-asset markets: structure, stress episodes in 2022 and policy considerations

Author

Listed:
  • Giorgio Abate

    (Bank of Italy)

  • Nicola Branzoli

    (Bank of Italy)

  • Raffaele Gallo

    (Bank of Italy)

Abstract

This paper provides a conceptual framework to analyse risks and vulnerabilities in crypto-asset markets and describes the episodes of stress observed in these markets in 2022. The analysis is used to provide preliminary policy considerations that are relevant for financial stability. We highlight the importance of setting a clear perimeter for financial regulation and of developing global rules to address financial stability risks in the areas covered by financial regulation following the principle "same risk, same regulatory outcome". Authorities could discourage and monitor exposures of supervised or overseen operators to areas not directly covered by financial regulation while trying to incentive the adoption of safe and sound risk management practices by entities involved or operating in these areas. Finally, we provide concrete proposals to implement these considerations.

Suggested Citation

  • Giorgio Abate & Nicola Branzoli & Raffaele Gallo, 2023. "Crypto-asset markets: structure, stress episodes in 2022 and policy considerations," Questioni di Economia e Finanza (Occasional Papers) 783, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_783_23
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2023-0783/QEF_783_23.pdf
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    References listed on IDEAS

    as
    1. Bullmann, Dirk & Klemm, Jonas & Pinna, Andrea, 2019. "In search for stability in crypto-assets: are stablecoins the solution?," Occasional Paper Series 230, European Central Bank.
    2. Raphael Auer & Marc Farag & Ulf Lewrick & Lovrenc Orazem & Markus Zoss, 2022. "Banking in the shadow of Bitcoin? The institutional adoption of cryptocurrencies," BIS Working Papers 1013, Bank for International Settlements.
    3. Sirio Aramonteand & Wenqian Huang & Andreas Schrimpf, 2021. "DeFi risks and the decentralisation illusion," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    cryptoassets; financial stability; stablecoin; decentralized finance; leverage; investor run;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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