A number of Oxford researchers calls for the government to immediately issue regulations against Bitcoin and other types of crypto assets, as it can prevent the systemic risks of traditional financial systems.
The latest research was published by the University of Oxford School of Law. The researchers argue that trading in crypto assets, including Bitcoin, should be limited in times of crisis like this, to prevent systemic risks to traditional financial systems.
Researchers, Hadar Jabotinsky and Roee Sarel view, that the behavior of the crypto asset market is a valuable indicator of systemic risk for the traditional financial system during times of crisis.
As the crypto asset market becomes more intertwined with traditional financial institutions, the risk of one financial institution collapsing and causing adverse effects will increase.
“In short, if investors initially saw the crypto asset market as a substitute for traditional financial markets in times of crisis. So strict regulation of it can help in preventing systemic risk in ordinary financial markets,” said the researcher.
Limiting Bitcoin Trading, Save Traditional Markets?
However, the researchers met the impossibility of their own suggestion. That how to limit crypto asset trading in times of crisis like this? There are also drawbacks to this approach and perhaps an impossible approach, he said.
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“Regulators must still be careful not to undermine the benefits of the crypto asset market in times of crisis. Special types of security tokens, for example, can be used to raise capital from the public if the traditional market collapses. This can alleviate liquidity constraints and reduce the risk of a bank run,” he said.