The current economic landscape presents formidable challenges, as new data reveals that 2023 is poised to witness the highest number of Chapter 11 filings in over a decade. In the face of these evolving business conditions, the government is actively seeking to address the predicament. To accomplish this, they must streamline the complex equation, eliminating external factors beyond their control that may induce turbulence or uncertainty. Policymakers encounter difficulties in tackling the risks associated with crypto assets and related activities, given their potential to impact consumer protection, financial stability, and market integrity. Consequently, even seemingly familiar ventures such as ETFs are temporarily halting operations.

Grayscale, following a warning from the SEC, has suspended its ETH futures ETF plans, while Bitwise has modified its SEC filing to postpone the launch of Ether ETF products.
The remarkable success of the crypto sector is unfortunately overshadowed by a wave of problems, scams, and frauds, thereby limiting the technology’s expansion, particularly in areas like digital identity. Media and regulatory attention remains fixated on these wrongdoings and the lack of compliance. While the absence of a central authority aligns with the blockchain philosophy, it creates a dearth of control and coordination. A recent Bloomberg News survey conducted across 60 influential companies within the sector reveals that several major firms have yet to disclose their financials.

Furthermore, a review of governance practices highlights a significant number of organizations lacking the necessary safeguards to prevent a recurrence of scandals. Among companies that divulged details about their current auditor, 46% stated their affiliation with one of the Big Four.

The digital asset space, being relatively new, poses challenges even for well-established auditors in addressing these issues. Surprisingly, the crypto industry lacks a consortium or alliance responsible for defining, regulating, and certifying this emerging asset class. Economic, legal, and technical challenges span the “tokenization continuum,” which signifies the varying degrees of feasibility in tokenizing traditional assets. While moderate gains can be achieved through the simplest tokenization processes, the most substantial gains entail overcoming significant obstacles. Against this backdrop, recent concerns arise from a DeFi protocol embroiled in a $3 million scam, despite having received an audit from Certik. Perhaps it is time to draw inspiration from FinTech companies like Revolut, which are actively bolstering their financial crime teams. Addressing these challenges requires serious compliance efforts and proposing integration standards that align with existing financial service regulations, necessitating additional resources.

In conclusion, the economic landscape is undeniably challenging, with a surge in Chapter 11 filings and a range of risks associated with crypto assets. As we navigate these circumstances, it is crucial for governments and policymakers to take proactive measures to address the issues at hand.Firstly, simplifying the equation and mitigating external factors beyond their control should be a priority. Streamlining regulations and fostering an environment that promotes stability and certainty will help businesses navigate these uncertain times. Secondly, there is a pressing need for the crypto industry to establish a consortium or alliance that defines, regulates, and certifies this emerging asset class. This collaborative effort would enhance transparency, compliance, and accountability, thus restoring trust and unlocking the full potential of the technology. Moreover, addressing the prevalence of scams and fraud requires a multi-faceted approach. The industry, media, and regulators should focus not only on highlighting wrongdoing but also on promoting compliance and good governance practices. Establishing robust guardrails and ensuring proper financial disclosures are essential steps toward building a sustainable and trustworthy ecosystem. Furthermore, bridging the gap between the digital asset space and traditional financial services necessitates the collaboration of established auditors. Investing in the necessary capabilities and expertise to address the unique challenges posed by digital assets will facilitate a smoother integration and adoption process. Lastly, the example set by companies like Revolut, by building dedicated financial crime teams, should be embraced by the industry as a whole. Strengthening compliance efforts and integrating with existing financial service regulations will not only mitigate risks but also enhance the credibility and legitimacy of the crypto sector.

By implementing these recommendations, governments, regulators, and industry stakeholders can navigate the challenges posed by the evolving economic landscape and foster an environment that fosters innovation, trust, and responsible growth in the crypto industry.