FRM Part II · FRM Exam Part II · Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets
Which feature of the crypto ecosystem most contributes to investor protection concerns for retail holders of unbacked crypto assets?
Retail investor protection is a concern mainly because of information asymmetry, weak disclosure, misleading marketing and fraud in crypto markets. Safeguards such as deposit insurance, suitability rules and audited statements are generally absent.
- APervasive information asymmetry, weak disclosure and the prevalence of misleading marketing and fraudCorrect
- BMandatory deposit insurance on all exchange balances
- CStrict suitability requirements applied by all trading platforms
- DStandardised audited financial statements for every token
Explanation
Retail investors face limited disclosure, aggressive marketing, scams and weak redress. Deposit insurance, universal suitability rules and audited statements generally do not exist for unbacked crypto assets.
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