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    • 12

      Fiat currencies are created and issued by sovereign governments, and stored and transferred by banks and other regulated financial institutions on behalf of users. In contrast, the crypto asset ecosystem enables users to create, store and transfer Crypto Assets without the need for any third party. This creates a set of unique challenges for regulators worldwide. Without regulated entities controlling the creation and use of Crypto Assets, the system is open to significant Financial Crime and other risks.

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      The Spot Crypto Asset Framework is comprehensive in order to effectively address the key risks that spot trading of Crypto Assets poses. FSRA's view is that regulation of AML/CFT risks alone will not sufficiently mitigate certain wider Crypto Asset related risks. Given the increased use of Crypto Assets as a medium of financial transactions, and their connectivity to the mainstream financial system through Crypto Asset and Derivative exchanges and intermediaries, there is the increased potential of contagion risks impacting the stability of the financial sector. There is also currently no safety net that ensures that users will be able to recover their Crypto Assets in case of loss or theft.

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      Accordingly, the FSRA has addressed issues around consumer protection, safe custody, technology governance, disclosure/transparency, Market Abuse and the regulation of Crypto Asset Exchanges in a manner similar to the regulatory approach taken in relation to securities exchanges globally.