[5]  Chart 1 Prices of bitcoin and selected altcoins (USD thousands)  Source: CryptoCompare. Notes: The data are for the period from 1 January 2015 to 15 June 2023 and are based on the price of crypto-assets as in the Crypto Coin Comparison Aggregated Index (CCCAGG) provided by CryptoCompare. The altcoins’ names are abbreviated as follows: Bitcoin (BTC), Ether (ETH), Polkadot (DOT), Ripple (XRP), Cardano (ADA), Litecoin (LTC), Chainlink (LINK), Dogecoin (DOGE), Binance Coin (BNB), Bitcoin Cash (BCH), Uniswap (UNI), Solana (SOL). Understandably, many are now questioning the future of crypto-assets. But the bursting of the bubble does not necessarily spell the end of crypto-assets. [6] People like to gamble and investing in crypto offers them a way to do so. [7] Crypto valuations are highly volatile, reflecting the absence of any intrinsic value. This makes them particularly sensitive to changes in risk appetite and market narratives. The recent developments that have affected leading crypto-asset exchanges have highlighted the contradictions of a system which, though created to counteract the centralisation of the financial system, has become highly centralised itself. Today I will contend that due to their limitations, cryptos have not developed into a form of finance that is innovative and robust, but have instead morphed into one that is deleterious. The crypto ecosystem is riddled with market failures and negative externalities, and it is bound to experience further market disruptions unless proper regulatory safeguards are put in place.

Enhancing transparency and awareness of the risks associated with crypto-assets and their social cost are critical aspects of this approach. Public authorities will also need to address those social costs: for instance, cryptos’ ecological footprint cannot be ignored in view of environmental challenges. Additionally, the experience of FTX, which expanded massively with little oversight, underscores the importance of global crypto regulation and regulatory cooperation. The Financial Stability Board’s  recommendations[39] for the regulation and oversight of crypto-asset activities and markets need to be finalised and implemented urgently, also in non-FSB jurisdictions. The Basel Committee on Banking Supervision's standard on the prudential treatment of banks' crypto-asset exposures is a positive step in this direction. It stipulates conservative capital requirements for unbacked crypto-assets with a risk weight of 1,250%, as well as an exposure limit constraining the total amount of unbacked crypto a bank can hold to generally below 1% of Tier 1 capital. It will be key for the European Union and other Basel jurisdictions to transpose the Basel standard into their legislation by the 1 January 2025 deadline[40]. However, regulation alone will not be sufficient. Innovating: digital settlement assets and central bank digital currencies Third, the public sector needs to contribute to the development of reliable digital settlement assets. Central banks are innovating to provide a stability anchor that maintains trust in all forms of money in the digital age. Central bank money for retail use is currently only available in physical form – cash.