Are crypto-assets a threat to financial stability?
Speech prepared for the seminar series Women in Finance - University of Hohenheim
20.04.2023 | Hohenheim | Claudia Buch
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1 What matters for financial stability?
1.1 Size
1.2 Interconnectedness and common exposures
1.3 Complexity
1.4 Substitutability
1.5 Leverage
2 Are crypto-assets relevant for financial stability?
2.1 What are crypto-assets?
2.2 Size and market structure
2.3 Common exposures and interconnectedness
2.4 Complexity
2.5 Substitutability
2.6 Leverage
3 Implications for the regulation of crypto-asset markets
3.1 Risks inherent in crypto-asset markets require preventive regulation.
3.2 Preventive regulation requires monitoring risks in crypto-asset markets.
3.3 International initiatives address risks and improve monitoring, while gaps remain.
4 Summing up
5 References
This version: 25 April 2023
Spring has come, but whether the crypto-asset winter is over remains to be seen. Those who see
crypto-assets mainly as a conduit for illegal and gambling activities would certainly hope that
turbulent spells in markets for crypto-assets have provided a salutary lesson. Those who see
productive potential in these new technologies would hope that these episodes help separate the
wheat from the chaff.
Which of those views prevails is an open issue. Whether crypto-assets that promise to improve the
provision of financial services ultimately deliver on those promises crucially depends on the
regulatory response. Which services are useful, how market structures evolve, whether new
entrants are able to challenge the incumbents, what risks are associated with this - all this is
shaped by regulations that apply to crypto markets.[2]
Today, I would like to focus on the financial stability implications of crypto-assets. So far, the
crypto market has been small. Market capitalisation of crypto-assets stands around 0.2% of global
financial assets.[3]
However, if there is one thing we've learnt from the past, it is that even seemingly small pockets
of distress can breed financial crises. Crypto-assets promise innovative ways of providing financial
services, just as the securitisation of financial assets did in the 1990s. Securitisation was an
innovation considered to improve the allocation of risks in the financial system. It, too, started
small in the 1980s, only to grow to an annual issuance volume of approximately half of
outstanding mortgage and consumer loans in 2007.[4] Similarly, the US mortgage market was
considered to be of relatively minor importance - only to send shockwaves through the global
financial system in 2007-08. [5]
Hence, assessing risks to financial stability early on is important. In a nutshell, financial stability is
about ensuring that the financial system provides its services to the real economy - even in times
of stress and structural change. [6]
Currently, the crypto-asset world is not very connected to the traditional financial system or to the
real economy. [7] This may be good news. Failures and stress in these markets may not put
financial stability at risk. But it could also mean precisely the opposite: perhaps there is not much
real value-added in crypto-assets and the underlying technologies while, at the same time, high
leverage in largely unregulated markets could lead to instability in the core financial system?
Before answering these questions and addressing the need for regulatory action, let me start by
giving an overview of how we assess financial stability. In the second part of my talk, I will apply
these concepts to the crypto-asset market. This comparison will show that:
First, risks inherent in crypto-asset markets require preventive regulation.
•
Preventive regulation requires, second, monitoring risks in crypto-asset markets early on, and
•
third, international initiatives to address risks and improve monitoring, but relevant gaps
•
remain, in particular to prevent cross-border regulatory arbitrage.[8]
1 What matters for financial stability?
Defining what is "systemic" is not easy from a conceptual point of view, and recent stress in the
financial system shows that the market environment matters. Different indicators are thus used to
capture the degree of systemic importance of financial institutions.
Banks are classified as either significant or less significant institutions, with implications for
regulation and supervision. The classification of banks uses a number of indicators: size,
interconnectedness and common exposures, complexity, and substitutability.
Before comparing the core financial system to the crypto-asset system based on these indicators,
let me stress that the quality of information is radically different.
For the core financial system, in particular for banks, we have fairly good information. Banks are
tightly regulated, and regulation requires reporting. These reporting systems have been
significantly upgraded following the global financial crisis, which involved costs for both banks
and public authorities. [9] These investments are paying off: we now know much more about
linkages in the financial system, and about exposures and risk concentrations. This information is
not perfect, but gaps that were identified during the global financial crisis have been closed fairly
well - and work continues.
In the crypto-asset world, the situation is drastically different: crypto-asset markets are not (yet)
regulated comprehensively, which means there are hardly any reliable reporting systems. One
might think that this would not be necessary. After all, one of the promises of crypto-assets is
transparency: All information should be publicly available and traceable for everyone. But publicly
available transaction data is hardly sufficient to monitor and assess risks in crypto-asset markets.
For example, transactions cannot be linked to specific individuals, and much trading of crypto-
assets takes place "off-chain".
Unless proper reporting standards are applied, we have to rely on information provided
voluntarily. Such information can hardly be checked for validity, and it is potentially subject to
manipulation. This risk is particularly high for self-reported trading volumes on unregulated
exchanges. There is indeed increasing evidence of price manipulation, in particular in illiquid
markets. [11]
Most of the data on crypto assets that I use in the following is taken from publicly available
sources. It has been subjected to some plausibility checks, such as comparisons with other
sources, but should still be treated with caution.
But let's begin by looking at indicators of systemic risk in the banking system.
1.1 Size
The bigger banks are, the larger is their systemic footprint. Generally, banking systems are
dominated by very few, very large players. Idiosyncratic shocks that affect these institutions can
thus have implications for the entire financial system. [12]
The German banking sector is no exception: the top 1% of banks account for 51% of market
share in terms of total assets. The large number of smaller banks - more than 1,300 savings banks
or cooperatives - have an aggregate market share of 41% (Chart 1).
Chart 1: A few large banks dominate the German banking sector.
This chart shows the market share in terms of total assets of German banks (€9.4 trillion in Q4
2022) grouped by their level of systemic importance. The figures in brackets refer to the number
of banks in each group. For the purpose of this illustration, global systemically important
institutions are not included in the set of other systemically important institutions, which,
including the G-SII, would contain 16 banks. In the same way, the G-SII and O-SIIs are not
included in the subset of the remaining significant institutions (SIs) in this illustration. Less
significant institutions (LSIs) and other banks constitute the rest of the banking system.
The systemic footprint of large banks cannot be observed directly. However, statistical indicators
can be used to assess this impact indirectly. One relevant question is, for example, how a potential
shortfall in capital for a stressed large bank is correlated with a shortfall in capital for the entire
financial system. This is what the CoVaR methodology measures (Chart 2). [13] Calculating this
measure for the German financial system recently shows a decline in the level of systemic risk. Yet,
the current levels still exceed those before the global financial crisis.
Chart 2: The systemic footprint of banks in Germany has trended downwards but remains above levels
observed before the global financial crisis.
In the aftermath of the 2007-08 financial crisis, the G20 launched financial sector reforms to
reduce the "too big to fail" problem: banks which become so large that their disorderly failure
would cause significant disruption to the wider financial system and economic activity.
Systemically important banks are often rescued - or "bailed-out" - by the government in the
event of distress. They benefit from an implicit guarantee, which becomes explicit in times of
crisis. This changes incentives: if risks are ultimately borne by the taxpayer, funding costs may not
fully reflect risks, thus incentivising excessive risk-taking, balance sheet growth, and management
compensation. In order to mitigate these risks, tighter capital requirements and supervision are
imposed on systemically important banks, and the effects of these reforms have been evaluated
by the Financial Stability Board, which is an international entity to monitor the global financial
system. [14]
1.2 Interconnectedness and common exposures
Size alone is certainly not a sufficient metric to assess systemic importance. Smaller banks can be
systemically important if the system is highly interconnected and if banks are exposed to the same
type of risk - such as interest rate risk.
One channel for interconnectedness is the interbank market. During the global financial crisis,
liquidity provision through the interbank market suddenly dried up. Banks cut credit lines to each
other as uncertainty about counterparty credit risk increased. Hence, between 2008 and 2022,
the share of interbank assets and liabilities in terms of total loans of German banks fell from 19%
to 8%. Liquidity provision through central banks increased. [15] More recently, the volume in the
German interbank market has increased, but it remains far below the values observed prior to
2008 (Chart 3).
Chart 3: Interbank exposures have declined following the global financial crisis.
While the interbank market is a channel for direct contagion in the financial system, common
exposures to the same shock can lead to indirect contagion effects. This risk is particularly acute at
the current juncture. Higher interest rates and higher risk to the growth outlook expose
vulnerabilities in the financial system that have built up over time. Maturity transformation
exposes banks to interest rate risk. Adverse shocks to the real economy can increase credit risk for
many banks quite broadly.
1.3 Complexity
A highly complex entity can be systemically important. Complexity can have different dimensions,
such as the volume of derivatives business, a large number of (international) affiliates, or
operational complexity. The more complex a bank is, the greater the costs and time needed to
resolve it. [16] A cross-border resolution of such an entity requires coordination among authorities
in multiple jurisdictions. [17] A vivid example of the resolution of a complex entity is the Lehman
Brothers insolvency: it took 14 years after the bank's failure to resolve it. [18]
1.4 Substitutability
Very specialised providers of financial services can be systemically important, even if they are small
or not highly complex. Providers of infrastructure such as the payment systems services are one
example. If such an institution experiences distress or even fails, other services can be disrupted as
well and liquidity may dry up. The more specialised the institution, the more costly it is to replace
its services.[19]
1.5 Leverage
Time and again, leverage in the financial system has been a trigger of financial crises. High
leverage makes borrowers vulnerable to adverse shocks such as a rise in interest rates or losses in
income. This increases credit risk and leads to losses for financial institutions. Poorly capitalised -
highly "leveraged" - financial institutions respond by cutting the provision of financial services and
credit, which has negative repercussions for the real economy. Therefore, the reform agenda of
the past decade has focused on reducing leverage in the financial system. Banks are indeed better
capitalised than they used to be - while leverage in the private and public sector has continued to
increase.
2 Are crypto-assets relevant for financial stability?
There is no simple metric that measures "financial stability". Rather, financial stability is shaped by
the complex interaction between the financial products that are offered, market structure,
leverage and governance of financial institutions, regulation and, not least, the incentives and
objectives of the people who are providing these financial services.
The one important distinction between providers of traditional financial services, such as banks,
and crypto-asset providers is technology. Apart from that, many features are similar - including
potential risks to financial stability.
So let's discuss these features in turn, beginning with what crypto-assets actually are.
2.1 What are crypto-assets?
Currently, there is no internationally agreed definition of crypto-assets. According to the Financial
Stability Board (FSB), a crypto-asset is a "
(...) digital asset (issued by the private sector) that depends primarily on cryptography and
distributed ledger or similar technology".
The traditional financial system uses conventional IT infrastructure. Securities transactions and
holdings are recorded by a central securities depository in a centralised database - a "ledger". [20]
In contrast, crypto-assets are issued and recorded on a shared and distributed digital ledger - a
"blockchain". The most popular blockchains for crypto-assets are public and permissionless.
"Public" means that all transactions are visible to all, but in a pseudonymous way: participants
within the network interact via identification code, but the actual identity of the participant is
usually unknown. "Permissionless" means that new information can be added by anyone
("miners" or "validators") fulfilling the technical requirements using a computerised process that
validates transactions ("consensus mechanism"). Depending on the underlying consensus
mechanism, mining and validation of some crypto-assets requires a lot of computing power,
which makes the process very energy-intensive. For example, crypto-assets like Bitcoin have an
energy consumption comparable to that of a medium-sized country like Spain. [21] Despite these
technological differences, crypto-assets have features in common with the traditional financial
system: trading on market places and exchanges, provision of payments services, lending, or use
of collateral in financial transactions.
Two types of crypto-assets are relevant:
The first are "native" tokens. These are not backed by any real or financial assets and are hence
labelled "unbacked" crypto-assets. This distinguishes them from traditional financial instruments
or currencies. Unbacked crypto-assets have no fundamental value and are not backed by any cash
flows, and their price is driven entirely by sentiment. [22] The two best-known native tokens are
Bitcoin and Ether, the native token of the Ethereum blockchain. Native tokens are integral to
permissionless blockchains as they reward miners or validators for settling transactions by adding
new blocks to the chain.
The second type of crypto-assets are stablecoins. These are mostly pegged to central bank
currencies such as the US dollar. Stablecoins have been primarily developed to overcome
inefficiencies and reduce costs in the traditional payments system. [23] Although coined as being
"stable", the market valuations of stablecoins in fact fluctuate quite significantly. Also some
stablecoins are not fully audited, and they disclose their reserves on a voluntary basis only. Hence,
the existence and composition of reserves cannot always be verified.
2.2 Size and market structure
The total market capitalisation of all crypto-assets traded on exchanges reached an all-time high
of roughly US$3 trillion in 2021 (Chart 4). In the first half of 2022, prices for crypto-assets
collapsed. Besides changes in the macroeconomic environment, this price decline reflected the
widespread use of leverage. Many crypto-asset intermediaries became insolvent, and market
capitalisation dropped to US$1 trillion in early 2023, or 0.2% of global financial assets.
Chart 4: Market capitalisation of crypto-assets is highly concentrated and low compared to the traditional
financial system.
The market is highly concentrated. The top six tokens accounted for more than 70% of market
capitalisation. [24] As regards issuers of stablecoins, 90% of market capitalisation is concentrated
within the three largest entities (Chart 5). A large proportion of all crypto-asset trading takes place
on just a few platforms. Centralised crypto-asset service providers and crypto-asset conglomerates
offer many different services simultaneously, such as brokerage, trading, Iending, custody, as well
as clearing and settlement. This concentration of activities can lead to conflicts of interest and
excessive risk-taking though.
Chart 5: The market for stablecoins peaked in early 2022, and it is highly concentrated.
Part of crypto-asset activity has shifted to decentralised finance (DeFi). In this model, financial
intermediaries are replaced by autonomous (and self-executing) open-source software protocols
deployed on public blockchains. Unlike in the case of centralised crypto-asset exchanges, where
most transactions are initially settled outside of the blockchain network, all transactions are
executed on the blockchain ("on-chain"). Changes to the software code should not be decided by
central bodies, but by a "community" and "governance token", representing a kind of voting
right.
What sounds like a decentralised system is, in practice, often highly concentrated. The monitoring
and governance of DeFi protocols is often in the hands of a few founders or developers, who
gradually transfer relevant rights to a broader community. Hence, only a very few projects
function in a truly decentralised manner. [25]
A key metric to evaluate the size of DeFi is total value locked (TVL), reflecting the sum of crypto-
assets that have been transferred to the software code underlying a DeFi protocol. [26] These
codes are called "smart contracts". These protocols can replicate a wide range of financial
services, but lending and trading of crypto-assets are currently the most important ones. After
very strong growth in 2021, the size of the (global) DeFi market decreased enormously in 2022, in
line with the overall development in the crypto-asset market (Chart 6).
Chart 6: DeFi activity peaked at end-2021 before collapsing in line with the overall crypto-asset market.
In today's most important blockchains, validators join groups ("pools"). The resulting high
concentration at the level of validators can potentially have a negative impact on the security and
transparency of a blockchain. [28]
2.3 Common exposures and interconnectedness
The crypto-asset system is highly interconnected, as highlighted by the recent bankruptcies of
numerous crypto-asset entities. Procyclical selling can thus affect the overall volatility of crypto-
asset markets.
Common exposures in the crypto-asset system largely correspond to those in the traditional
financial system. Prices of crypto-assets have been responsive to macroeconomic fundamentals
such as monetary policy shocks, especially since 2020. [29] Prices declined sharply during recent
periods of increased macro-financial risks, much in line with traditional asset classes such as
equities (Chart 7).
Chart 7: Correlations between Bitcoin returns and other asset classes have fluctuated over time.
In addition, the crypto-asset system is highly exposed to settlement and operational risk in a small
number of blockchains. For example, almost two-thirds of DeFi activity is based on the Ethereum
blockchain as a settlement layer. [30]
The crypto-asset system is exposed to liquidity risk. Only a few stablecoins are crucial for the
liquidity of crypto-asset trading, and they are also widely used as collateral for collateralised loans
or margin trading. Liquidity in the crypto-asset system specifically depends on a few stablecoins
pegged to the US dollar. [31] These back their tokens mainly by investments in money market
instruments. The system is thus exposed to shocks in money markets.
Currently, the crypto-asset system is not highly connected with the financial system. As long as
crypto-asset entities do not have the necessary licences themselves, they depend on banks as a
bridge between central bank currencies and the crypto-asset world to receive funding. Yet, only a
few internationally active banks reported crypto-asset exposures as at the end of June 2022,
accounting for only 0.013% of total exposures. [32] Similarly, investment funds based in the EU
have limited exposure to crypto-assets as well. In April 2022, 111 funds reported crypto-asset
exposures, all of which were Alternative Investment Funds. [33] The majority of these funds were
small, with net asset values below €100 million. By way of comparison, there is a total of around
60,000 investment funds in the EU, representing an aggregate net asset value of around €18
trillion.[34]
2.4 Complexity
Crypto-asset providers can be highly complex. Crypto-asset conglomerates resemble financial
conglomerates with complex risk profiles. [35] They not only operate as pure exchanges, but offer
many different services within a single entity, including custody and derivatives trading.
In the traditional financial system, these activities are separated or subject to prudential
requirements in order to prevent conflicts of interest. In the case of FTX, for example, a similar
separation or sufficient governance structures were not in place. [36]
Crypto-asset conglomerates provide financial functions across multiple jurisdictions and operate
through a network of global affiliates. Some are headquartered in unregulated off-shore regions
or have no known headquarters at all. In addition, it is difficult to enforce rights against a specific
person in a decentralized system without appropriate governance structures. This prevents
effective supervision through domestic regulators, especially in the absence of international
agreements on regulatory compliance and supervision. [37]
2.5 Substitutability
Some blockchains and assets within the crypto system would be difficult to replace in the short
term. At the current juncture, the crypto-system is largely self-referential, and crypto-assets are
hardly used outside the crypto system. This limits negative implications for the functioning of the
broader financial system or for the real economy.
In certain developing countries, however, the situation differs. El Salvador, for example, has
declared Bitcoin to be legal tender. But even in countries that actively promote the use of crypto-
assets as a means of payment, adoption seems to remain limited. [38]
2.6 Leverage
High leverage is a key risk for financial stability - in traditional finance as well as in crypto-asset
markets. A high degree of leverage amplifies boom and bust phases within the crypto-asset
system, and it can be a channel for the propagation of shocks to the traditional financial system.
[39]
Leverage is a particular issue in the crypto-asset system, as collateral often consists of unbacked
crypto-assets with no intrinsic value, which tend to be highly volatile. Borrowed funds are often
reused as collateral for other loans, giving rise to "collateral chains". [40] In the event of an abrupt
decline in prices, a chain reaction can occur as assets serving as collateral are automatically
liquidated, thus amplifying the price declines.
Crypto-asset exchanges allow for margin trading that increases leverage: the exchange lends
crypto-assets to users, usually against collateral. In these margin trades, a user could borrow
crypto-assets worth up to 20 times the collateral value. [41] Some exchanges also offer leveraged
derivatives that can achieve leverage multiples of up to 100 times.
Leverage has indeed been a key channel of contagion during recent spells of market turbulence.
The collapse of the stablecoin TerraUSD in May 2022 led to heavy losses for highly leveraged
crypto-asset hedge funds. As a result, they were unable to meet their margin calls, thereby
triggering bankruptcies of crypto-asset lending platforms. [42] Also, the insolvency of FTX was
caused by lending out client funds to affiliated entities engaged in margin trading. [43]
3 Implications for the regulation of crypto-asset markets
3.1 Risks inherent in crypto-asset markets require preventive regulation.
Risks that are inherent in the traditional financial system are also inherent in crypto-asset markets.
This requires appropriate regulation - regulation which does not unduly constrain innovation, but
that ensures investor protection, financial market functioning, and financial stability.
Providers of services in crypto-asset markets need to comply with basic standards - above all
accounting standards. Additional rules apply to providers of financial services: rules on consumer
protection, conduct rules, rules preventing money laundering and anti-terrorist financing rules,
and microprudential regulation. Ultimately, all these policies lay the foundation for a stable and
resilient financial system.
At the current juncture, the size of crypto-asset markets may not pose immediate risks to financial
stability. Having said that, financial regulation has an important preventive function.
The OECD's principles of financial regulation state: "A pre-cautionary approach is warranted
in financial regulation; policy makers should pro-actively anticipate and address emerging
risks and problems and not initiate reforms solely in response to the onset of a crisis". [44]
Therefore, it is important to address potential systemic risks as early as possible through
preventive regulation. Economically similar activities and risks require similar regulation and
supervision.
3.2 Preventive regulation requires monitoring risks in crypto-asset markets.
Preventive regulation requires, at a minimum, to carefully monitor crypto-asset markets. Doing so
requires significantly improved information. Atlas, a project of the Eurosystem Centre of the BIS
Innovation Hub, will develop a data platform to provide reliable insights into the macroeconomic
relevance of DeFi and crypto-asset markets. This open-source data platform will provide
information on market capitalisation, economic activity and international flows of crypto-assets.
[45]
Competitive effects on the core financial system also need to be better understood. If new
entrants facing weaker regulation provide better financial services, competitive pressure on
incumbents increases. This can be welfare-enhancing - but it can also imply undue risks which
become more difficult to contain once a market segment has grown.
Monitoring based on information that is provided voluntarily by the private sector does not
suffice. There is no assurance that such information is regularly available and of sufficient quality.
Hence, we need minimum reporting standards for crypto-asset providers that allow for a
consistent monitoring of markets and risks.
3.3 International initiatives address risks and improve monitoring, while gaps remain.
Several regulatory initiatives are ongoing with the aim of monitoring crypto-asset markets,
separating crypto-asset markets from the core financial system, and addressing risks in crypto-
asset markets.
The Financial Stability Board coordinates international regulatory and supervisory approaches to
crypto-asset activities. In 2020, it published recommendations on the regulation, supervision and
oversight of global stablecoin arrangements. [46] Updated recommendations are scheduled for
publication in July 2023. [47]
As regards the exposure of banks to crypto-assets, the Basel Committee on Banking Supervision
(BCBS) adopted a supplement to the Basel Framework in 2022 that sets international minimum
standards for the prudential treatment. Two groups of crypto-assets are distinguished:
Group 1 comprises tokenised traditional assets and certain stablecoins. These are subject to
•
capital requirements based on the risk weights of underlying exposures as in the existing Basel
Framework.
Group 2 comprises all other crypto-assets, including unbacked crypto-assets. These are subject
•
to more conservative capital requirements. A bank's total exposure must not exceed 2%, and
should be lower than 1%, of its Tier 1 capital. If exposures exceed 2% of the bank's Tier 1
capital, then the full exposure to assets in Group 2 must be backed by own funds.
Banks have to comply with these rules by 1 January 2025, and implementation will establish
reporting requirements for banks.
The European Union is already in the process of implementing new standards, which arguably
makes it the first jurisdiction with a comprehensive regulatory regime for crypto-assets and
markets. [49] The European Union's Markets in Crypto-Assets Regulation (MiCA) balances
incentives for innovation against risks to the financial system and investors through
requirements regarding the issuance of crypto-assets and crypto-asset services;
•
the authorisation and supervision of issuers of crypto-assets and of crypto-asset service
•
providers;
capital requirements and governance rules;
•
reserve requirements for stablecoin issuers based on the existing regulations for e-money
•
issuers.
MiCA will also impose reporting requirements on entities carrying out crypto-asset activities.
Issuers of stablecoins not pegged to the euro with an issuance value of more than €100 million
must report certain information. Providers of trading platforms must make information publicly
available, and they must give public authorities access to data. Enhanced monitoring
arrangements apply to "significant" service providers (with at least 15 million active users).
With the international approach of regulation and containment, we are on the right track - but
significant gaps remain. Further work in a number of areas is required:
Address concentration risks: Currently, MiCA imposes governance requirements for activities
•
within the same entity but not for activities across an entity or group. [50] Given that risks can
arise from the concentration of certain activities within one entity, it needs to be monitored
whether MiCA addresses these risks sufficiently or whether an extension is needed.
Address risks related to banks issuing crypto-assets: Risks for banks from issuing their own
•
crypto-assets, such as tokenised deposits, require monitoring and mitigation, as needed.
Regarding tokenised deposits, it has not yet been fully clarified whether they would fall under
crypto-specific regulation or under traditional banking regulation.
Limit regulatory arbitrage: [51] Service providers from regions that do not implement minimum
•
regulatory standards could be prevented from providing services in well-regulated jurisdictions.
One option would be to prohibit crypto-asset service providers and banks in well-regulated
jurisdictions from doing business with providers in non-compliant jurisdictions. Also, a common
understanding of the scope of MiCA and the approach to decentralised DeFi applications across
Europe is needed.
Improve reporting: MiCA addresses risks in parts of the crypto-asset market, and it provides
•
improved information. However, crypto-asset activities that are currently not covered by MiCA,
such as crypto-asset lending, need to be closely monitored as well. Moreover, reporting
requirements for crypto-asset exposures should be introduced not only for banks but also for
other financial institutions. For example, MiCA sets out no reporting requirements for wallet
providers or for exposures between trading platforms and issuers. Also, there are no
requirements for financial institutions other than banks to report exposures to crypto-assets.
4 Summing up
Crypto-assets and markets are a relatively recent innovation in finance. It may be too early to draw
lesson