Policy brief

The economic potential and risks of crypto assets: is a regulatory framework needed?

What is the economic potential and the risks of crypto assets? Regulators and supervisors have taken great interest in these new markets. This Policy

Publishing date
06 September 2018

This Policy Contribution is a version of a paper written at the request of the Austrian Presidency of the Council of the European Union for the informal ECOFIN meeting of EU finance ministers and central bank governors (September 2018).


We analyse and assess the economic potential and risk of crypto assets and discuss key regulatory questions that European Union policymakers need to confront. Crypto assets can be broadly classified as cryptocurrencies – a private means of payment – and initial coin offerings (ICOs), typically used to fund new activities against the promise of future utilities (utility tokens) or financial returns (securities tokens). Crypto exchanges and wallets provide services such as exchanging crypto assets into central bank currencies and brokerage services.

The underlying technologies – record keeping in distributed ledgers and blockchain – facilitate peer-to-peer interactions without intermediaries and are still experimental. They have been praised as offering benefits for many applications beyond finance, but there is also significant scepticism.

The crypto asset market has seen huge variation in its market valuation. After a peak of above $800 billion (January 2018), it fell to around US$200 billion (August 2018). Cryptocurrencies such as bitcoin have dropped markedly in value. The amount of funds raised through ICOs has also declined substantially since its March 2018 peak.

Regulators and supervisors have taken great interest in these new markets. Different regulators in Europe classify and treat cryptocurrencies differently. Some classify cryptocurrency as a unit of account while others reject it as a financial instrument. Several regulators take the view that case-by-case assessments of ICOs are necessary. There seems to be convergence on the view that crypto exchanges and wallet providers should require authorisation to operate.

Crypto assets raise six major public policy questions: how great is the potential of crypto assets in advanced financial systems? What is the best way to combat illegal activity such as money laundering and terrorism finance? How can consumer and investor protection be ensured? What about financial stability? How might crypto assets be taxed? And how can blockchain applications be embedded into the existing legal framework?

European policymakers must first decide whether crypto assets should be isolated, regulated or integrated. We argue that at this point regulation is the right approach. Second, global cooperation in the managing risks of the new technology should be ensured while reaping the opportunities it undoubtedly provides. The G20 and the Financial Stability Board should set regulatory norms that address the six policy questions. Standard-setting organisations such as the International Organisation for Standardization should also play a role. Third, EU policymakers need to agree on the right moment to move supervision of crypto assets from the national level to the EU level. In a single market for capital, diverging supervisory practices can come with significant downsides and this is particularly true for highly mobile crypto assets. However, different supervisory practices can allow experimentation with different approaches to a fast-changing technology.

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About the authors

  • Guntram B. Wolff

    Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Public Policy and Economics at the Willy Brandt School of Public Policy. From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

    An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, Business Insider ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and  advisory board of Elcano.

    Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media. 

  • Maria Demertzis

    Maria Demertzis is a Senior fellow at Bruegel and part-time Professor of Economic Policy at the Florence School of Transnational Governance at the European University Institute. She was Bruegel’s Deputy Director until December 2022. She has previously worked at the European Commission and the research department of the Dutch Central Bank. She has also held academic positions at the Harvard Kennedy School of Government in the USA and the University of Strathclyde in the UK, from where she holds a PhD in economics. She has published extensively in international academic journals and contributed regular policy inputs to both the European Commission's and the Dutch Central Bank's policy outlets. She contributes regularly to national and international press and has regular column that appears twice a month in various EU newspapers and on Bruegel’s opinion page.

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