A recent report by International Monetary Fund (IMF) indicates that the rapid growth of Bitcoin and other cryptocurrencies will have a major impact on the international financial system. The report dubbed “World Economic Outlook: Challenges to Steady Growth” in part stated that Cybersecurity attacks on this critical and fundamental financial infrastructure present an additional risk to the economy. The risks undermine cross-border payment system by disrupting provision of services and flow of goods from one country to another.
As noted by CCN, the rapid growth of cryptocurrency and other related digital assets has not gone unnoticed as evident from the many legislations being created by government and international financial regulators to ensure that the industry does not operate continue to be unregulated. Note that if left unregulated, the vulnerabilities could pose serious challenges to the international financial system.
Positive Developments in Cryptocurrency Regulation and Development
Despite the fact that the overall value of crypto market declined by 80%, the industry is still booming and more people are investing in the various cryptocurrencies. Significant positive developments in cryptocurrencies regulation as well as emergence of new cryptos are enough proof that the industry is headed in the right direction.
In a bid to reduce the risks and promote growth, leading cryptocurrency exchanges such as Gemini and Coinbase as well as financial institutions such as Goldman Sachs and Cboe have put in place teams and resources to strengthen the infrastructure and technology. One of the major highlights is that both institutional investors and retail traders get an equal opportunity to invest large amounts of money in their preferred crypto assets.
According to the IMF report, the main reason why hackers are so interested in cryptocurrencies is that they are considered alternative to the fiat currency and have a higher market value. Most of the hackers target digital asset trading platforms using sophisticated hacking techniques to get away with thousands of digital assets worth millions of dollars.
Gemini, for example, recently obtained insurance services from AON in a bid to cushion itself as well as clients from any lose that could arise from a security breach. With this insurance cover in place, Gemini is able to cover its clients’ funds and holdings amicably.
Continuously improving the blockchain technology and infrastructure that supports cryptocurrencies will greatly help to reduce the risks and help legitimize the industry. Despite the challenges, crypto experts are optimistic about the industry and hope that governments will use a “no harm approach” to come up with regulations that will help the industry grow. Already, International Monetary Fund (IMF) categorizes cryptocurrencies as assets. More needs to be done to ensure that the industry continues to grow and the risks are combatted effectively. Needless to say, more investors will be willing to invest their money if the cryptocurrency regulations are implemented and exchanges come up with robust security measures of locking out hackers.