Martin: The four primary risks of crypto

Simone Martin is a long-service regulator that lives on the edge of the regulatory perimeter - and isn't afraid to get her hands dirty to dig deep into problems, ideally before they manifest themselves.


There are a few "circles" where I chat about compliance and crypto.

As a regulator that "hodls" crypto, (and yes, that includes having one degree of separation from Signature Bank as the past 'on ramp' to purchase crypto), I'll share my views here (as opposed to my membership) on the current events impacting traditional banking, FinTech and more.

1. There is and have been for over 3 years, four risks in play:- (i) contagion; (ii) systemic; (iii) concentration; and (iv) liquidity. Of course, other risks are present, but those four, in my opinion, have the biggest sting.

2. The first 2 risks above have been elevated since the 2008 global financial crisis. Remember, it is the crisis that drove many into crypto.

3. Without being a Monday morning quarterback in the regulatory ecosystem, you do not need to be a 20-plus year regulatory veteran to see that the 'approach' to FinTech in the US is fractured when contrasted with the rest of the world. Speaking "Regulator" does help. In some of those circles, I have opined for more than a few months (more than a year to be sure) that it is unfortunate but the rest of the world is moving on without the US.

4. Regulatory frameworks are still not moving fast enough globally (and I'll continue to tilt at my windmill of a 'Regulatory Hackathon' that I've posited in various places including in my tedxtalk).

It's no fun being a regulator in the midst of a crisis (been there, done that). Standard setters will develop case studies (towards preventing future crises), but for the now, there are a lot of elements - both good and bad - that I am expecting to see.

There are many challenges in regulating novel products, which is why I am suggesting a rethink of how regulators approach the very issue.

The scale and scope for economic reverberations in the age of digital applications demand some design thinking.

Part of the reason I started buying crypto - using my own money not the regulator's - was to examine some of the actual modalities for myself. The 'hodl' is not a typo, by the way.

Regulators seeking to regulate something new from a theoretical vantage point has its dangers (think unintended consequences that affected systematically important financial institutions in past years).

However, there are progressive Regulatory Authorities that are getting the guardrails up and guidance issued. Curious on what Authorities are making progress? Look to the members of the Global Financial Innovation Network that are across the pond (from my vantage point).

Simone Martin is Simone Martin is a non-conventional regulator with over 21 years of experience. In channelling her passion for compliance, Simone founded IGNUS SOLUTIONS LIMITED in 2021 – a platform created to empower compliance professionals through its membership – *CHASING COMPLIANCE* and compliance courses, her YouTube channel - The Si of Regulation - and other forums, She can be contacted via LinkedIn here:

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