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Over the past few years, the convergence of traditional, centralized finance (CeFi) with digital assets and decentralized finance (DeFi) has increasingly become evident. While the innovations underlying Bitcoin, digital assets and DeFi have been around for well over a decade, its real-life applications and their penetration into the financial services sector have grown exponentially over the past few years. As of today, USD 300 Billions of digital assets traded on a daily basis over 300 crypto exchanges globally. 9 countries have launched their CBDC2 , and 15 are in the Pilot stage, and many more are in the development or research stage.
We talk about convergence because in fact, traditional players of the financial services sectors are increasingly investigating, experimenting and even delving into digital assets, offering services that were previously only available through non-traditional players. Whereas, the crypto ecosystem is increasingly seeking to work with regulatory bodies to help define the regulatory framework and diversify into non-crypto product offering.
On March 9th, 2022, the White House issued the Executive Order (EO) on Ensuring Responsible Development of Digital Assets. The content of the 13 pages EO, unsurprisingly overall well received by the crypto industry, reinforces the importance of striking a balance between innovation and regulation. To achieve its purpose of greater financial inclusion, to be a sustainable innovation, in all its meanings, and to act as a trusted alternative to complement existing infrastructures and services, digital assets and their underlying and complementary infrastructures must combine with the adequate level of governance. The EO acknowledges that the path towards mainstream adoption of digital assets requires a clear regulatory framework, and it sets out a timeline to do just that.
However, the importance of the EO and associated Presidential actions also lies in its acknowledgement that digital assets are intrinsically financial innovations, innovations that are already part of the economy, not something in the distant future. And the adequate answer to innovation is not simply to ban it, nor to blindly accept it. Rather, it lies, at least from a governmental standpoint, in ensuring that the technological blinspots or weak points are mitigated through adequate regulation, strong governance models, transparency and information sharing. Moreover, the EO further shows that the knowledge gap is closing, recognizing that the crypto industry has moved beyond the discovery phase. The administration understands what are digital assets, the infrastructure construct and their potential use cases; at least partially. The following two pages of this document summarize some of the potential implications for the different players of the digital asset ecosystem we might anticipate.
This document summarize some of the potential implications for the different players of the digital asset ecosystem we might anticipate.
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