The ongoing crash in cryptocurrencies should lead to a stronger, better future for crypto assets.
, cryptocurrencies that are ostensibly backed by reserves of dollars and other financial assets that should help keep their value stable, proved fragile amid the downturn.
The new technologies have created products that could not have been imagined before, including digital playthings that are often of little practical value, such as nonfungible tokens and meme cryptocurrencies. But there are also some useful ones such as smart contracts that allow financial assets to be bought and sold directly without the intervention of traditional intermediaries. This should, at a minimum, lower costs and improve efficiency by creating competition for entrenched institutions.
Second, as the technology matures and operates within regulatory guardrails, it could start playing a role in improving the workings of the financial system. In particular, the technology has the potential to make certain elements of finance, including payments, more efficient. Regulation is also necessary to ensure that cryptocurrencies do not sow more financial instability. Even stablecoins, which were ostensibly just meant to make payments more efficient within and across national borders, have proved financially fragile. Stablecoins have in effect become similar to money market mutual funds or deposit-taking institutions while not being regulated as either.
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