![handle is hein.journals/sjls2024 and id is 1 raw text is:
Singapore Journal of Legal Studies
[2024] 1-31
GREAT CRYPTO CRISIS: THE PRUDENTIAL
REGULATION OF SYSTEMICALLY IMPORTANT
CRYPTO CONGLOMERATES
SIJUADE ANIMASHAUN*
Since the crypto winter began in early 2022, several market crashes and institutional collapses
have ravaged the innovative financial ecosystem. Among global regulators, the major discourse is
no longer the full prohibition of crypto-related activities but the protection of traditional financial
systems from a great crypto crisis capable of disrupting financial stability. However, existing
regulatory frameworks lack clarity on major aspects of the crypto ecosystem, especially relating
to new associational risks and its potential to drive systemic risks among crypto conglomerates.
This article examines the anatomy of recent crypto crashes and highlights the limitations of exist-
ing global regulatory developments toward preventing these threats from potentially spreading to
traditional financial systems. To these emerging concerns, the article argues for the adoption of an
entity-based approach to crypto regulations. Specifically, it proposes the application of adjusted
prudential regulations to a new category of systemically important crypto intermediaries (SICIs)
like traditional systemic institutions.
I. INTRODUCTION
Digital currencies,1 especially cryptocurrencies and global stablecoins (GSCs) are
no longer novel phenomena. Since Bitcoin emerged over a decade ago, the num-
ber of cryptocurrencies and the volume of their activities has grown rapidly.2 The
proponents of the innovative digital ecosystem emphasise that its inherent advan-
tages such as pseudonymity, regulatory flexibility and reduced transaction costs are
some of the primary drivers of its growth trend. Moreover, most crypto owners still
consider it a form of digital revolution providing pathways to escape the extensive
regulatory regimes applicable to traditional financial institutions (TFIs) and finan-
cial activities. These opportunities extend across all the broad spectrum of crypto
applications, whether as financial instruments, payment systems or, recently, invest-
ment securities.
But, despite these apparent benefits, the alternative ecosystem has since become
known for other worrying trends, particularly financial and market crises. In 2021,
* PhD Candidate, Faculty of Law, The University of Hong Kong (sijuade@connect.hku.hk).
This term is used broadly to include all variants of crypto products, irrespective of their financial func-
tions and linkage to traditional financial assets, including global stablecoins.
2 Reaching nearly over 10,000 as of 2022. See Statista, Number of cryptocurrencies worldwide from
2013 to November 2022 <https://www.statista.com/statistics/863917/number-crypto-coins-tokens/>
(accessed 19 December 2022) (9 January 2024).](ViewImageLocal?handle=hein.journals/sjls2024&div=1&collection=&method=preview&ext=.png&size=3)
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