The Bank of America has urged more mainstream regulatory action in the wake of the collapse of crypto exchange FTX.
FTX was one of the most prominent cryptocurrency exchanges, but failed when affiliated entity Alameda Research was found to have been gobbling up consumer funds in the hope of placing high-yield investments.
The events that followed dealt a serious blow to the credibility of the industry, as highlighted by Bank of America in a new report posted last week.
Report analysts Alkesh Shah and Andrew Moss said it was not all bad news for crypto, but that the FTX collapse has highlighted the urgent need for regulation.
There should also be a shift in the way cryptocurrencies are approached by the wider industry, with institutions ensuring that any investments in the sector are focused on companies and products that have real-world functionality.
To see cryptocurrencies become mainstream, there would need to be a concentrated regulatory effort, the report said. Not least, such safeguards would help protect consumers and investors, the analysts added.
Because of FTX, the focus is once again on the need for transparent legal frameworks for digital assets, which foster technological innovation but protect those exposed to the investments from such collapses.
The bank also wrote that the top 100 crypto tokens have lost 64% of their value year-to-date, although they are still 2,175% from their end-of-2016 levels.
The Bank of America added that it’s the “underlying blockchain technology driving this speculation that could be revolutionary” and worth preserving. To make sure that this remains the case, more not less regulation is needed.
Bank of America has previously publicly referred to cryptocurrencies as “risk assets”, and has been reluctant to embrace cryptocurrencies itself.
Regardless, the bank seems to be confident that there is a place for crypto in the future, but whatever that future may be, it will require robust regulation.
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