PODCAST | A stroke of GENIUS? Implications of digital assets policy 

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Over the last decade, a new world order has been trying to emerge from the cracks of enduring systems. When Nick Szabo proposed the idea of “bit gold” in 1998, he opened the portal to inventions that changed how humans thought and dealt with money forever. 

It led to the birth of digital assets. Digital assets are intangible items of value that are stored and transferred digitally. Since the early 2000s, digital assets have enjoyed consistent growth and adoption. In 2025, it’s estimated that over 560 million people worldwide own digital assets; corporations, banks, and other large financial institutions have adopted digital assets. 

But the success of digital assets didn’t come without controversy. One of the outstanding talking points for digital assets sceptics is involvement and regulation by governmental agencies. Jason Allegrante, the Chief Legal and Compliance Officer at Fireblocks, had an insightful chat with Silvia Andreoletti, Senior Reporter at Trade Finance Global (TFG), about regulations and government involvement in the digital assets industry. 

Challenges facing the regulation of digital assets

1. Fragmentation: One of the significant problems facing the regulation of digital assets is the absence of harmonisation. Digital assets are inherently decentralised. The nature of digital assets presents a paradox that is difficult to navigate for regulators. While it’s advantageous that digital assets do not have sole ownership and control, it poses another problem. 

It creates a world where there are a multitude of issuers of digital assets, and each government/state has different laws and policies to regulate them. The entire situation creates a chaotic environment that dispels interest in digital assets from users and the government.

2. Regulatory arbitrage: This challenge stems from the one above. The lack of global standardisation in regulating digital assets creates loopholes that can be capitalised upon. Allegrante puts it succinctly: “Regulatory arbitrage is attempting to receive more favourable regulatory treatment in one jurisdiction than you might in another.” 

Some countries and regions have reduced restrictions and taxes on digital assets, and for these reasons, firms register their businesses there while simultaneously running in other parts of the world. Those that benefit from regulatory arbitrage often lobby against universal regulation standards. 

Beyond these, a handful of other factors have contributed towards stunting the growth of regulation in the assets industry. For example, the industry is very volatile, and the rate at which innovative solutions are churned out might be difficult for the typically bureaucratic systems of government regulation to keep up with. 

Benefits of increased regulation in digital assets

Despite all these challenges, regulation in the digital assets industry is essential and inevitable for growth. Allegrante said, “Regulation is critical to creating the institutional ecosystem we want. Institutions don’t want to play in an unregulated space, particularly with something like a digital asset. So for us, regulation is a baseline. It creates a level playing field, consumer protections, all these things you absolutely want in the market.”

The advantages of regulation in the digital assets market are as follows:

1. Eliminates fragmentation and regulatory arbitrage: Regulatory proposals from global leaders such as the USA and multilateral organisations like UNIDROIT can help achieve the harmonisation dream in the digital assets market. However, for this to happen, the digital assets industry needs to start embracing the idea of regulation to bring clarity on standards, rules, and best practices. 

2. Increased transparency and accountability: Digital asset critics have often expressed concerns about its use as a criminal trade tool. They cite the fact that digital assets are difficult to trace as the reason for this. The fears of criminality with digital assets will be reduced with regulations and governmental involvement. 

3. More adoption: The public sentiment towards digital assets has been hostile over the last decade. One of the most effective ways to change this is by building public trust through regulations and governmental policies. Doing this will help the industry flourish, attracting both participants and liquidity in the digital assets market.

Beyond regulations

Governmental involvement in the digital assets industry needs to go beyond regulatory approaches. Infrastructures should be put in place to support the growth of the digital assets industry. 

According to Allegrante, “Things like custody, like infrastructure, like payment rails, the ability to send and receive securely between an issuer and its downstream customers,” could help create an ecosystem where innovation can thrive.

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The digital assets industry has much more to offer. However, it might not reach its full potential if stakeholders don’t come together to act as one. The focus, firstly, should be on harmonising rules and policies that govern the industry. This will open doors for other factors that will further strengthen the industry and inspire more growth.