Fed’s Brainard Says Crypto Needs To Be Regulated Before It Threatens Financial System• July 9, 2022 6:18 pm • Comments
The Federal Reserve Vice Chair, Lael Brainard, just stated that the crypto industry needs to be regulated as soon as possible before it could potentially threaten the existing financial system.
This was quite the alarming statement given that most government officials had dismissed crypto as a thing just five or more years ago.
Brainard goes into detail and explains that this digital ecosystem has the ability to transform financial services completely which means it needs to be properly regulated before it gets too big.
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Most speculators do understand that regulation is needed in order for mainstream adoption to take place, but the main issue is possible over regulation and the creation of regulation that is clearly biased towards certain crypto tokens over others.
In fact, the lack of clear guidelines has very likely enabled the SEC to carry out its own interpretation of the rules which the crypto community was against.
‘The crypto financial system turns out to be susceptible to risks “that are all too familiar from traditional finance,’ said Federal Reserve Vice Chairwoman Lael Brainard https://t.co/FIQbpEQFwo
— WSJ Markets (@WSJmarkets) July 8, 2022
The lack of regulation guidelines has been a confusing and troublesome issue for the crypto industry, whose participants are keen to develop and expand businesses but are unclear on the regulatory parameters within which they can do so.
Despite this year’s crash — the price of bitcoin is currently about 70% below its November all-time high of $68,982.20 — U.S. regulators continue to call 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 (D-N.Y.) introduced legislation to create a regulatory framework for crypto that would empower the Commodity Futures Trading Commission to regulate most of the industry.
With more and more government officials stepping in and voicing out their concerns now, it seems like this will eventually happen no matter what and the only thing left to figure out is when.
The Fed official also once again referenced the collapse of the UST stable coin as a point of concern.
Right now, it seems that such a crisis within the crypto market seemed to be contained within the crypto industry and had yet to affect the traditional financial markets.
But Brainard shared the concern that one day, the crypto market might grow to a significant enough size where there could be spillover effects.
The Fed may likely use this as reasoning for their push towards regulation as soon as possible, so investors should take notice when that happens.
ICYMI: Federal Reserve’s Brainard urges crypto regulation before industry becomes more entangled with the financial systemhttps://t.co/C7CuKyMOkU
— The Block (@TheBlock__) July 8, 2022
She suggested that all this reinforces the idea that a central bank digital currency from the U.S. “may be an advantage for future financial stability.”
Such a government token could have profound implications for the private stablecoin market.
The Senate is soon expected to confirm Michael Barr, President Joe Biden’s pick to be the next Fed vice chairman for supervision, who will lead the central bank’s regulatory and financial-supervision efforts, including how the U.S. will oversee stablecoins.
Barr is widely seen as a consumer advocate who will promote tough regulation.
He served for a time on the advisory board of crypto firm Ripple, and so he is familiar with the industry.
The @federalreserve's Lael Brainard isn't shy about cataloguing the recent failings in crypto, and suggesting that tough new rules will be needed.
— CoinDesk (@CoinDesk) July 8, 2022
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