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Around the world, banking and financial systems are regulated and have to adhere to strict rules to keep trading. Until recently digital currencies were considered "too small" to require such oversight.

Last week, the cryptocurrency exchange FTX collapsed - owing around three billion dollars to its biggest creditors - no one knows if that will ever be repaid.聽聽

A senior official at the Bank of England said it is time to start regulating crypto currencies - before they become more intertwined with mainstream financial systems.聽

But with many types of cryptocurrency and cryptocurrency exchanges, what can be done to regulate the sector?

Eswar Prasad, professor of economics at Cornell University, says regulation of the sector is "harder" compared to the traditional financial system.

This is because with many cryptocurrencies, it is not "not clear who to regulate" as they are essentially "managed by a piece of computer code."

However, if you were to regulate "custodians of cryptocurrency assets" (such as FTX), and commercial banks' ability to "dabble" in cryptocurrency, this could "make for a more stable financial system."

(Photo: Eswar Prasad attends The New York Times DealBook DC policy forum on June 9, 2022 in Washington, DC. Credit: Leigh Vogel via Getty Images)

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