Fed’s Brainard says crypto needs regulation now before it becomes so big that it threatens financial system

Federal Reserve Vice-Chairman Lael Brainard has become the latest official to speak about crypto, saying Friday that regulations are needed or that the industry could be at greater risk.

“Innovation has the potential to make financial services faster, cheaper, more comprehensive and in a way that is unique to the digital ecosystem,” she said at a Bank of England conference in London. Said in his speech. “It is important to establish a sound regulatory foundation for cryptographic financial systems before they can become very large or interconnected and pose a risk to the stability of the broader financial system. . “

The lack of regulatory guidelines has been a confusing and annoying problem for the crypto industry, where participants are enthusiastic about developing and growing their business, but uncertain about the regulatory parameters they can build.

Despite this year’s crash Bitcoin It is currently about 70% below the November record high of $ 68,982.20. US regulatory agencies continue to focus on the potential, growth, reach, and potential impact of the lack of a clear framework for the industry.

Brainard’s comments were released a month after Senator Cynthia Lummis (R-Wyo.) And Kirsten Gillibrand (DN.Y.). Introduced legislation to create a regulatory framework In the case of cryptocurrencies that the US Commodity Futures Trading Commission empowers to regulate most of the industry.

Earlier this year, President Joe Biden Announced Presidential Order on Cryptocurrencies It tried to fix the lack of framework for crypto development in the United States

Brainard on Friday emphasized the volatile nature of cryptocurrency prices.

She also put further pressure on crypto prices and exacerbated emotions, especially recent events. Tera’s collapseAnd an attempt to create a distributed stablecoin before that, and now Liquidity crisis centered on Three Arrows Capital..

New technology and financial engineering alone cannot convert risky assets into safe assets, she said.

“Despite significant investor losses, the cryptocurrency system is not large enough to pose systemic risk or does not appear to be interrelated with the traditional financial system,” she added. rice field. “This is a good time to establish constraints to adequately contain the cryptocurrency activity permitted to regulated entities and the spillover effect on the core financial system.”