Crypto-Assets: Mitigating Risks and Protecting Consumers
Catch Professor Lee Reiners (Duke University School of Law) and Sangita Gazi (HKU Faculty of Law) in a discussion about their recent paper:
Wanted: A Prudential Framework for Crypto-Assets
Lee Reiners and Sangita Gazi's research paper recommends that U.S. bank regulators assess the extent of banks' exposure to crypto-assets, mitigate the associated risks, and clarify the prudential requirements. The rise of cryptocurrencies has highlighted the need for consistent and clear regulations to mitigate risks and protect consumers. Failure to do so could result in significant consequences for the stability of the financial system and the broader economy.
The paper discusses the collapse of cryptocurrency exchange FTX in November 2022 and its limited impact on the traditional financial system. The paper argues that this outcome was due to the limited interconnections between the crypto ecosystem and traditional finance and the coordinated actions of federal bank regulators who had previously expressed concerns over banks' engagement in crypto-asset activities. However, the paper notes that existing guidance lacks sufficient detail to clarify the prudential requirements associated with various crypto-related activities banks engage in.
Thursday, May 11 | 7AM HKT
Wednesday, May 10 | 7PM ET
Streamed via HKU FinTech's LinkedIn, Youtube, Twitter, and Facebook.
The paper is available for download at SSRN.
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About the discussion:
TechReg 360 recently hosted a thought-provoking discussion on the challenges and opportunities presented by crypto-assets. In this session, Lee Reiners and Sangita Gazi shared their insights on the US financial market and regulatory experience with the recent bank crises, while addressing a wide range of topics related to the crypto industry. The discussion covered FTX's postmortem, which explored how limited interconnections with banks prevented disaster in the crypto market. The speakers also delved into the complex relationship between crypto and the regulated banking system, and the need for separate regulation of cryptocurrency as a risky asset class. Other key points discussed include the adequacy of current prudential regulatory standards for crypto-assets, managing risks in the volatile crypto asset class, the suitability issue with Bitcoin futures in legacy institutions, and the role of regulatory agencies in the adoption of cryptocurrencies. The Basel Committee, conflicting interests of banks, and the regulation of cryptocurrency were also covered, along with the importance of interconnectedness and regulatory frameworks in minimizing risk for crypto-assets. The discussion concluded with an analysis of the balancing act faced by regulators in Dubai's VARA, which is giving crypto firms flexibility while also mitigating risks, and the importance of regulatory clarity for skeptics and believers in the crypto industry. This informative discussion is a must-watch for academics, financial and regulatory professionals, and senior ranking officials interested in gaining a deeper understanding of the challenges and opportunities presented by the crypto industry.
Topics discussed / Chapter guide:
03:11 FTX Postmortem: Crypto's Limited Interconnections with Banks Prevented Disaster 07:04 Unfolding Novel Risks: Assessing the Adequacy of Current Prudential Regulatory Standards for Crypto Assets 09:17 Managing Risks in the Volatile Crypto Asset Class 13:41 The Complex Relationship Between Crypto and the Regulated Banking System 18:45 The Precautionary Principle and the Risks of Crypto: Insights from Recent Banking Failures 23:35 The Suitability Issue with Bitcoin Futures in Legacy Institutions 26:05 Debating the Need for Separate Regulation of Cryptocurrency as a Risky Asset Class 33:35 The Role of Regulatory Agencies in the Adoption of Cryptocurrencies in the US Financial Market 37:56 Who Regulates Crypto: The Ongoing Debate Surrounding the Crypto Space in the US 41:39 The Basel Committee, Conflicting Interests of Banks, and the Regulation of Cryptocurrency 45:23 The Role of Interconnectedness and Regulatory Frameworks in Minimizing Risk for Crypto Assets 48:07 Balancing Act: Is Dubai's VARA Giving Crypto Firms Too Much Flexibility? 53:41 Crypto as a Religion: Skeptics, Believers, and the Importance of Regulatory Clarity
About Professor Lee Reiners
Lee Reiners is a lecturing fellow at the Duke Financial Economics Center and a lecturing fellow at Duke Law. At Duke, Reiners has taught classes on FinTech Law and Policy, Cryptocurrency Law and Policy, Financial Regulatory Policy, Climate Change and Financial Markets, and Cybersecurity Law and Policy. His broad research agenda focuses on how new financial technologies and climate change fit within existing regulatory frameworks. His work has examined the risks associated with cryptocurrency derivatives, the rise of digital investment advice, corporate governance failures within the financial industry, and climate-related risk disclosures. He writes frequently on FinTech and other financial regulatory matters on The FinReg Blog - where he is also Editor-at-Large - and speaks with financial policy experts on his podcast, The FinReg Pod. He also co-hosts Coffee & Crypto, a bi-monthly podcast that covers the latest developments in the world of cryptocurrency. Reiners also directs the Climate Risk Disclosure Lab at the Duke Financial Economics Center, which is dedicated to unbiased analysis around climate change and financial disclosure. Prior to joining Duke Law, Reiners worked for five years at the Federal Reserve Bank of New York (FRBNY), first as a supervisor of systemically important financial institutions and then as a senior associate within the executive office. In the latter capacity, he helped coordinate the FRBNY’s engagement with international standard-setting bodies, such as the Bank for International Settlements and the Financial Stability Board. While at the FRBNY, Reiners worked closely with other federal and state regulatory agencies. Reiners has previously taught corporate finance and managerial economics in the MBA Program at Saint Peter’s University. In 2004-2005, Reiners served as a U.S. Army communications specialist in Baghdad, Iraq. Reiners received a BSc in business economics, summa cum laude, from the University of St. Thomas and a MPP with a global policy concentration from Duke University’s Sanford School of Public Policy. Reiners holds the chartered financial analyst designation and serves on the CFA Institute's Capital Markets Policy Council.
About Sangita Gazi
Sangita Gazi is a Senior Research Fellow, Rutgers Law School | Research Associate, UCL Centre for Blockchain Technologies | Policy Analyst, International Law Institute | Fintech Fellow, Banking and Finance Law Review | Postgraduate Research Fellow Asian Institute of International Financial Law. Sangita is currently taking her doctoral degree under the supervision of Professor Douglas Arner and Dr. Giuliano Castellano at HKU, writing her thesis: "The Legal and Regulatory Framework of Central Bank Digital Currencies (CBDCs) in Emerging Market Economies: An Appraisal of Risks and Benefits": "I am Sangita Gazi, a Ph.D. candidate at the Faculty of Law, University of Hong Kong (HKU). Before coming to HKU, I completed an International LL.M. from Duke University School of Law, USA, where I mainly focused on the interdisciplinary courses converging law, finance, and technology. The impacts of emerging technologies—blockchain in the payments system, the role of AI and big data, the growth of FinTech/RegTech— indicate that technologies are going to have a game-changing impact in the future. Therefore, my research interest involves issues around the intersection of law, finance, and technology and its actual and purported implications in the regulatory space. During my Ph.D. at HKU, I will be analyzing the legal and regulatory framework of Central Bank Digital Currencies (CBDC)—mainly from an emerging economy’s perspective. I also completed an LL.M. in International Development Law and Human Rights from the University of Warwick, UK. I worked as an Assistant Legal Advisor at the US Department of Justice in the US Embassy Dhaka, Bangladesh. I am also a Certified Information Privacy Professional in the United States."
About Reg/Tech Lab
Browse some of our research at
Led by Douglas Arner, a world-renowned expert in financial law and regulation, the Reg/Tech Lab is a global research and educational lab that focuses on the intersection of finance, innovation, sustainability, and technology. Through cutting-edge research and education initiatives, we strive to build better financial systems for the world.
More about: Professor Douglas W. Arner. He is the Kerry Holdings Professor in Law, an RGC Senior Fellow, and Associate Dean (Taught Postgraduate) of the Faculty of Law at the University of Hong Kong. At HKU, he co-founded and is the Faculty Director of the LLM Compliance and Regulation, LLM Corporate and Financial Law, LITE (Law, Innovation, Technology and Entrepreneurship), and EAIEL (East Asian International Economic Law and Policy) Programmes. In addition, Douglas is Associate Director of the Standard Chartered Foundation-HKU FinTech Academy, a Senior Visiting Fellow of Melbourne Law School of the University of Melbourne, a non-executive director of NASDAQ and Euronext listed Aptorum Group, an Advisory Board Member of the Centre for Finance, Technology and Entrepreneurship (CFTE), and co-founder and an executive board member of the Asia Pacific Structured Finance Association. He is co-founder and former Director of the Faculty’s Asian Institute of International Financial Law. Douglas has served as a consultant with, among others, the World Bank, Asian Development Bank, UN, APEC, Alliance for Financial Inclusion, and European Bank for Reconstruction and Development. Douglas specialises in economic and financial law, regulation and development. He is author, co-author or editor of eighteen books, including The RegTech Book (Wiley 2019), Reconceptualising Global Finance and its Regulation (Cambridge 2016), Financial Markets in Hong Kong: Law and Practice (Oxford, 2d ed., 2016), Finance in Asia: Institutions, Regulation and Policy (Routledge 2013), From Crisis to Crisis: The Global Financial Crisis and Regulatory Failure (Kluwer 2011) and Financial Stability, Economic Growth and the Role of Law (Cambridge 2007), and the author or co-author of more than 150 articles, chapters and reports on related subjects. His recent papers are available at SSRN [http://ssrn.com/authors=524849] where he is among the top 50 authors in the world by downloads. He is currently leading a major 5 year Hong Kong Research Grants Council Senior Research Fellowship project on the role of FinTech and RegTech in financial inclusion and the UN Sustainable Development Goals as well as a 4 year RGC Research Impact Fund project focusing on FinTech policy and regulation. From 2012-2018, Douglas served as Project Coordinator of a major five-year project funded by the Hong Kong Research Grants Council Theme-based Research Scheme on “Enhancing Hong Kong’s Future as a Leading International Financial Centre”. He is currently one of the core team of another TRS project focusing on digital finance, financial stability and financial inclusion. He led the development of one of the world’s largest massive open online courses (MOOC) on financial technology: Introduction to FinTech [https://www.edx.org/course/introduction-to-fintech], launched with edX in May 2018, now with over 100,000 learners spanning almost every country in the world, as part of the first online Professional Certificate in FinTech. Douglas has been a visiting professor or fellow at Duke University, Harvard University, the Hong Kong Institute for Monetary Research, IDC Herzliya, McGill University, Melbourne University, National University of Singapore, Queen Mary University of London, University of New South Wales, Shanghai University of Finance and Economics, and Zurich University, among others. He has lectured, co-organised conferences and seminars and been involved with financial sector reform projects around the world. Douglas served as Head of the Department of Law of the University of Hong Kong from 2011 to 2014. He was an inaugural member of the Hong Kong Financial Services Development Council (2013-2019) and Director of the Duke-HKU Asia America Institute in Transnational Law (2005-2016), and a member of the International Advisory Board of the Australian Centre for International Finance and Regulation from 2010-2016. In 2007, he received HKU’s Outstanding Young Researcher Award.
Catch Professor Douglas Arner, Tanvi Ratna, and Sijuade Animashaun in a discussion about the new report they co-authored:
Interdependencies in Crypto Ecosystems: Drivers, Implications and Policy Responses
The report’s findings and recommendations have significant implications for the development of regulations and the sustainability of the crypto ecosystem.
Find out why stakeholders must take note of these recommendations and how implementing them ensure the growth and stability of the crypto market.
This discussion is hosted/moderated by Ajay Shamdasani (host of Regulatory Ramblings Podcasts).
Policy 4.0 is a research and advisory body working on policy approaches for digital assets.
2 March 2023 | 12:30pm IST/ 3pm HKT
Streamed via HKU FinTech's LinkedIn, Youtube, Twitter, and Facebook.
The report is available for download at SSRN.
SUBSCRIBE to get notified on TechReg 360's upcoming discussions.
About Prof. Douglas Arner
Browse his works at
Douglas W. Arner is the Kerry Holdings Professor in Law, an RGC Senior Fellow, and Associate Dean (Taught Postgraduate) of the Faculty of Law at the University of Hong Kong. At HKU, he co-founded and is the Faculty Director of the LLM Compliance and Regulation, LLM Corporate and Financial Law, LITE (Law, Innovation, Technology and Entrepreneurship), and EAIEL (East Asian International Economic Law and Policy) Programmes. In addition, Douglas is Associate Director of the Standard Chartered Foundation-HKU FinTech Academy, a Senior Visiting Fellow of Melbourne Law School of the University of Melbourne, a non-executive director of NASDAQ and Euronext listed Aptorum Group, an Advisory Board Member of the Centre for Finance, Technology and Entrepreneurship (CFTE), and co-founder and an executive board member of the Asia Pacific Structured Finance Association. He co-founder and former Director of the Faculty’s Asian Institute of International Financial Law. Douglas has served as a consultant with, among others, the World Bank, Asian Development Bank, UN, APEC, Alliance for Financial Inclusion, and European Bank for Reconstruction and Development. Professor Arner is also a member of the advistory board at the research and strategy think-tank Policy 4.0. He is ranked in the top 10 law authors at SSRN (all time number of downloads of over 180,000) and the 4th most downloaded law authors in the last 12 months.
About Sijuade Animashaun
Sijuade Animashaun is an Adjunct Fellow at Policy 4.0. and a doctoral researcher at the Faculty of Law, The University of Hong Kong. His PhD focuses on the intersection of digital financial technologies with law and regulation. He has extensive experience working as a legal practitioner in financial regulations and has participated in several impactful projects with the Nigerian central bank and other key stakeholders in global financial systems.
About Jatin Bedi
Jatin Bedi is a Non-resident Scholar with Policy 4.0. He is a former fixed-income investment banking analyst with Nomura, who currently leads the traders tribe at a decentralized hedge fund. He holds an MBA in finance and has also held several roles in the alternative investments sector.