Fed’s Lael Brainard Calls for Fast Action to Regulate Cryptocurrencies
Federal Reserve Vice President Lael Brainard said on Friday the crypto industry needs strong regulation before it becomes ubiquitous and poses financial stability risks, Vice President Federal Reserve Lael Brainard said on Friday, noting that recent volatility in the space shows that cryptocurrencies are subject to the same risks as the traditional financial sector.
“It is important that the foundations for sound regulation of the crypto financial system are established now before the crypto ecosystem becomes too large or interconnected,” said Ms. Brainard. to the extent that could pose a risk to the stability of the broader financial system.” Bank of England Conference in London.
The risks of loosely regulated cryptocurrencies and stablecoins, operating in the legal gray area, have been centered on the sharp decline of the crypto market and the demise of the large “stablecoin” TerraUSD. The leading cryptocurrency bitcoin is down more than 75% from its all-time high in the past seven months.
The crash has brought down several major crypto companies, including Celsius Network, which has suspended customer withdrawals and may be looking to restructure, media reports the media. Meanwhile, Toronto-listed Voyager Digital and Singapore-based crypto hedge fund Three Arrows Capital, both of which filed for bankruptcy this month.
While the crypto industry has touted digital assets as fundamentally different from traditional finance, Ms. Brainard said the sector has proven to be susceptible to the same risks and subject to regulations. similar switch.
These risks include leverage, selling, opacity, maturities and liquidity mismatches, and contagion, she said, adding that new technologies and financial techniques cannot be We turn risky assets into safe assets.
“Future financial resilience will be greatly enhanced if we ensure that the regulatory perimeter covers the crypto-financial system and reflects the principle of co-risks,” said Ms. Brainard. , with the same result as specified”.
Ms. Brainard said national and international cooperation would be needed to ensure compliance with existing regulations and accommodate new ones.
