The Bank of Italy today publishes ‚Making it through the (crypto) winter: facts, figures and policy issues‘

The Bank of Italy has released a publication titled Making it through the (crypto) winter: facts, figures, and policy issues as part of the Markets, infrastructures, payment systems series.
The publication focuses on the significant increase in crypto-asset prices in recent years, which has attracted the attention of both retail and institutional investors.
Infact, it highlights the increasing public interest in „alternative money“ and the potential of Distributed Ledger Technologies (DLTs) for the „Web3“ infrastructure.
It mentions the existence of around 20,000 crypto-assets serving various purposes and the shift in the use of crypto-assets from replacing traditional money to being more commonly used as speculative investment instruments. The paper acknowledges the lack of a globally shared taxonomy for crypto-assets and distinguishes between unbacked and asset-backed crypto-assets.
Recent Trends in the crypto-asset markets are discussed, as the growth of the crypto-asset market, with the total capitalisation reaching $3 trillion in November 2021, followed by a significant decline. It refers to the bull run of 2017, the subsequent crypto winter, and the beginning of another crypto winter in 2022.
The impact of monetary policy normalisation on the crypto segment is discussed, noting the increasing financialisation of crypto-assets and their correlation with traditional risky securities. Despite the comovement with traditional assets, unbacked crypto-assets exhibit higher price volatility than traditional assets.
However, the market has recently experienced a sharp decline in prices, influenced by various events and tighter global financial conditions. The paper discusses the major events that occurred in the crypto-asset market in 2022 and examines the challenges faced by regulations.
The publication also explores the drivers behind recent regulatory developments and highlights the unresolved issues in the industry.