Regulation of Markets that Pose a Less Systemic Risk—The Crypto Asset Market Is an Example

Abstract

It has been argued that ‘Some markets pose a such little systemic risk to the overall financial system that they should never be regulated.’ However, even markets that are small and pose less systemic risk should also be regulated scientifically and appropriately. The crypto-asset market is currently one of the markets that the Financial Conduct Authority regulates to a lesser extent, so this paper uses this as an example to analyse the various risks that the crypto-asset market may pose in terms of consumer protection, financial crime, and systemic risk, and then explores a series of regulatory measures that the Financial Conduct Authority is currently taking to address these risks, such as consumer protection guidance, anti-money laundering directives, regulatory The discussion then explores the range of regulatory measures currently being taken by the FCA to address these risks, such as consumer protection guidance, anti-money laundering directives, regulatory sandboxes, etc. Finally, the need for effective regulation of financial markets is analysed in terms of enhancing consumer confidence, promoting financial innovation, and protecting good financial competition. In this way, it is concluded that the financial regulatory system should have to adhere to prudential regulation and strict supervision to maintain market order and prevent excessive risk-taking.