(Bloomberg) -- Regulators and bankers might not always agree, but they found common ground in Davos on the topic of crypto and regulating the digital asset industry.

Speaking at a panel on the challenges facing banks, Singapore’s Senior Minister Tharman Shanmugaratnam and European Central Bank Governing Council member Francois Villeroy de Galhau emphasized the need for crypto regulation, a sentiment echoed by UBS Group AG Chairman Colm Kelleher. 

Kelleher had kicked off the conversation on digital assets by commenting that regulators had “taken their eye off the ball with respect to the non-banking sector.”

“The greatest challenge today is non-banks,” Villeroy responded, citing recent episodes of financial instability including the performance of money market funds, UK pension funds hit by liability-driven investments, and the collapse of Sam Bankman-Fried’s FTX. 

“All of them have one common feature — they are all linked with non-banks. And here, we lag behind. It’s more difficult, because it’s a very evolving landscape,” he said. “We should rush to some urgent non-bank regulation starting with cryptos.”

For Singapore’s Tharman, “Some things are very clear: whether it’s crypto or traditional finance, you’ve got to regulate for things like money laundering.” But he suggested that regulating cryptoassets through a banking lens risked legitimizing an asset class he described as “inherently speculative” and “slightly crazy,” a comment met with laughter from the assembled Davos crowd.

Singapore, which emerged as a popular Asian crypto hub after China clamped down on the industry in 2021, has seen a string of firms based there end up in distress — from hedge fund Three Arrows Capital to digital-asset lenders Vauld and Hodlnaut Pte. That has dimmed officials’ appetite for the asset class, and regulators are restricting retail investors’ access to crypto trading. 

‘Unstoppable’ Blockchain

Kelleher echoed a refrain that has become common among executives at both traditional financial institutions and crypto companies. “We are looking for a regulatory framework that will allow us to accommodate that for our clients,” he said, referring to the desire by some UBS customers to invest in digital tokens.

Kelleher was bullish on the underlying technology of the blockchain, describing it as “unstoppable” while sounding a note of caution about the current difficulty of ensuring compliance with laws and policies around know-your-customer requirements and anti-money laundering provisions.

Citigroup Inc. Chief Executive Officer Jane Fraser said it was important to step back from debating crypto as “new and shiny, though maybe less new and less shiny” and instead turn to more urgent considerations. 

“Let’s focus on the issues that really matter to the world right now,” she said. “How do we weather through the storms we’re facing at the moment?”

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