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Hal S. Scott, John Gulliver & Connor Kortje, A Review of Cryptoasset Market Structure and Regulation in the United States (2023).

Abstract: This is the first in a series of reports by the Program on International Financial Systems dedicated to cryptoassets (also referred to as “digital assets”). This initial report defines and describes cryptoassets and the market structure for trading cryptoassets in the United States. It also provides an overview of the U.S. regulatory structure for the issuance and trading of cryptoassets and related financial products. A subsequent report will provide specific recommendations for improving the regulation of cryptoassets in the United States.In recent months, U.S. government officials have sharpened their focus on the policy issues raised by cryptoassets. For example, in fall 2022, U.S. financial regulators released a set of four reports on digital assets pursuant to the Biden Administration’s Executive Order 14067. The three Treasury Department reports address (1) the potential role of a central bank digital currency (“CBDC”) in the U.S. system of money and payments, (2) the implications for consumers, investors, and businesses from cryptoassets, and (3) countering the use of cryptoassets in illicit financing. In October 2022, the Financial Stability Oversight Council issued a report addressing the interconnectedness between cryptoasset markets and other financial markets and the financial stability risks arising from those connections. Our report is unique and complementary to these efforts in being the first to provide a comprehensive review of the market structure for trading cryptoassets and the regulation of cryptoassets in the United States.We also note that our report follows the November 2022 failure of Bahamian-based cryptoasset trading platform FTX, formerly the third largest such platform by global volume. The failure of FTX, which had U.S. operations and many U.S. investors and customers, underscores the timely need for enhanced public understanding of the market structure for trading cryptoassets and the regulation of cryptoassets in the United States.