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FRM Part II · FRM Exam Part II · Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets

Which statement best captures why unbacked crypto assets are described as difficult to regulate with a purely national approach?

Crypto activity is borderless and providers can move to jurisdictions with lighter rules, creating regulatory arbitrage. Effective regulation therefore needs consistent, internationally coordinated standards rather than purely national measures.

  1. ATheir issuance and trading are borderless and can shift to jurisdictions with weaker rules, so regulatory arbitrage requires international coordinationCorrect
  2. BThey can only be held by institutions in the largest economies
  3. CThey are denominated exclusively in local currency
  4. DThey are always traded on a single regulated exchange

Explanation

Crypto markets operate across borders and platforms can relocate, so national rules alone invite regulatory arbitrage. Coordinated, consistent standards are needed. The other statements are factually incorrect.

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