Feds Brainard says that crypto needs regulation before it gets too big
Lael Brainard, Governor of the US Federal Reserve, speaks at the National Association of Business Economics (NABE) Annual Meeting in Arlington, Virginia, Monday, September 27, 2021.
Al Drago | Bloomberg | Getty pictures
Federal Reserve Deputy Chief Lael Brainard was the last official to comment on the crypto, saying on Friday that regulation is needed or that the industry could be a greater danger.
“Innovation has the potential to make financial services faster, cheaper and more inclusive, and to do so in ways that are rooted in the digital ecosystem,”[ads1]; she said in a speech at a Bank of England conference in London. “It is important that the basis for good regulation of the financial cryptosystem is established now before the crypto ecosystem becomes so large or interconnected that it may pose a risk to the stability of the broader financial system.”
The lack of regulatory guidelines has been a confusing and troublesome problem for the crypto industry, whose participants are concerned with developing and expanding businesses, but are unclear about the regulatory parameters within which they can do so.
Despite this year’s crash – the price of bitcoin is currently about 70% below the all-time high in November of $ 68,982.20 – US regulators continue to draw attention to the industry’s potential, growth and reach, as well as the potential consequences of not having a clear framework for it.
Brainard’s comments come a month after Sens. Cynthia Lummis (R-Wyo.) And Kirsten Gillibrand (DN.Y.) introduced legislation to create a regulatory framework for crypto that would allow the Commodity Futures Trading Commission to regulate most of the industry.
Earlier this year, President Joe Biden announced an executive order on cryptocurrencies that sought to address the lack of a cryptocurrency development framework in the United States.
Brainard on Friday highlighted the volatile rating of cryptocurrency prices.
She also pointed to recent events that have pushed cryptocurrency prices further and weakened sentiment, especially the collapse of Terra, as well as attempts to create decentralized stack coins and the current liquidity crisis involving Three Arrows Capital.
“New technology and financial developments cannot in themselves convert risky assets into safe ones,” Brainard said.
“Despite significant investor losses, the cryptocurrency system does not appear to be so large or so interconnected with the traditional financial system that it poses a systemic risk,” she added. “This is the right time to determine which cryptocurrencies are allowed for regulated entities and under what constraints, so that spillovers to the core financial system remain well contained.”
