HomeBusinessFed's Brainard Says Crypto Needs Regulation Before It Gets Too Big

Fed’s Brainard Says Crypto Needs Regulation Before It Gets Too Big

U.S. Federal Reserve Governor Lael Brainard speaks at the annual meeting of the National Association of Business Economics (NABE) in Arlington, Va., Monday, Sept. 27, 2021.

Al-Draco | Bloomberg | Getty Images

Federal Reserve Vice Chairman Lael Brainard became the latest official to speak out on crypto, saying Friday that regulation is needed or the industry could become a broader danger.

“Innovation has the potential to make financial services faster, cheaper and more inclusive, and to do so natively to the digital ecosystem,” she said in a speech at a conference. the Bank of England in London. “It is important that the foundations for sound regulation of the crypto financial system be established now before the crypto ecosystem becomes so large or interconnected that it may pose risks to the stability of the financial system as a whole.”

The lack of regulatory guidelines has been a confusing and inconvenient issue for the crypto industry, whose participants want to grow and grow businesses, but are unclear about the regulatory parameters within which they can do so. .

Despite this year’s crash – bitcoin’s price is currently around 70% below its November all-time high of $68,982.20 – US regulators continue to draw attention to the potential, growth and industry scope, as well as the potential consequences of not having a clear framework for this.

Brainard’s comments come a month after the senses. 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 much of the industry.

Earlier this year, President Joe Biden announced an Executive Order on Cryptocurrencies that attempted to address the lack of a framework for crypto development in the United States.

Brainard highlighted the volatile nature of cryptocurrency prices on Friday.

She also highlighted recent events that have further pressured crypto prices and worsened sentiment, particularly the collapse of Terra, as well as attempts to create decentralized stablecoins and the current liquidity crisis involving Three Arrows. Capital.

“New technologies and financial engineering alone cannot convert risky assets into safe ones,” Brainard said.

“Despite significant losses for investors, the crypto financial system does not yet seem so large or so interconnected with the traditional financial system that it poses systemic risk,” she added. “Now is a good time to establish what crypto activities are permitted for regulated entities and under what constraints so that the fallout on the basic financial system remains well contained.”

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