Crypto Contagion – Managing Risk On Multiple Fronts

Crypto firm bankruptcies and resulting disruption in the crypto ecosystem will continue to exacerbate liquidity and regulatory concerns in this space. Signs of contagion are evident as prices of almost every cryptocurrency type have halved in recent months. Since all participants supporting the crypto ecosystem are at risk, managing that risk is critical.

Fund managers should be prepared on multiple fronts, as the following examples illustrate:

• Regulators broadening scope: The SEC is not just targeting fraudulent offerings but is scrutinizing all participants, including investors, in crypto transactions. At last count, the SEC and CFTC have brought five times as many crypto enforcement actions as the rest of the regulators in the world combined.