For US Commissioner Christy Goldsmith Romero, the recent cryptocurrency crash is reminiscent of certain elements of the financial sector prior to the 2008 crisis.
If the cryptocurrency market has seen some recovery over the past few hours, it is not a long calm river. Twice, in May and June, the ecosystem experienced unprecedented disruptions. The combination of tensions in traditional financial markets and the fall of the terra luna blockchain has caused two major cryptocurrencies to stumble.
Thus, Bitcoin and Ether lost more than 70% of their value compared to their historic peak in November. The fall of cryptocurrencies has melted the wallets of many investors and weakened some crypto companies, with some even filing for bankruptcy.
“The observed vulnerabilities warn of heightened risks in the cryptocurrency market, with parallel themes emerging during the 2008 financial crisis,” CFTC Commissioner Kristi Goldsmith-Romero said at a conference in New York.
For the manager, a major problem has already been pointed out by some authorities, including the International Monetary Fund and the European Central Bank. The relationship of growing links between traditional finance and the cryptocurrency market.
“The risk to financial stability could reach a level of systemic risk if there is more interdependence in the future between the cryptocurrency industry and traditional financial players that perform important market functions,” she said.
Cryptos had to move away from traditional finance
As for the latter, the philosophy behind the cryptocurrency project in a decentralized world is actually unknown. The official says that cryptocurrencies had to “break” with the traditional financial system. However, “unregulated cryptocurrency markets have exposed their vulnerabilities to financial stability risks similar to those of traditional finance, with themes paralleling those of the 2008 financial crisis.”
So far, if the US is considering regulating these assets, Europe has a head start on the MiCa (Crypto Asset Market) regulation that is due to come into effect in 2024.