Fed’s Lyle Brainard Urges Quick Action on Regulating Cryptocurrencies
Federal Reserve Vice Chairman Lyle Brainard said on Friday that the cryptocurrency industry needs stronger regulation before it poses financial stability risks, given the recent turmoil in the space. Huh.
“It is critical that the foundation for sound regulation of the crypto financial system is now established before the crypto ecosystem becomes so large or intertwined that it poses a risk to the stability of the wider financial system,” Ms. Brainard said in prepared remarks. Told. Bank of England Conference in London.
The risks of loosely regulated cryptocurrencies and stablecoins operating in a legal gray area, have come into focus with the rapid collapse of the crypto market and the collapse of major “stablecoin” TeraUSD. Leading cryptocurrency bitcoin has fallen more than 75 percent from its all-time high in the past seven months.
According to media reports, several major crypto companies have fallen by the accident, including Celsius Network, which has suspended customer withdrawals and is looking to restructure. Meanwhile, Toronto-listed Voyager Digital and Singapore-based crypto hedge fund Three Arrows Capital both filed for bankruptcy this month.
While the crypto industry has described digital assets as being fundamentally different from traditional finance, Ms. Brainard said the sector has proven susceptible to similar risks and should be subject to similar regulations.
These risks include leverage, fire sales, ambiguity, maturity and liquidity mismatch, and contagion, he said, adding that new technologies and financial engineering alone cannot turn riskier assets into safer ones.
“Future financial flexibility will be greatly enhanced if we ensure that the regulatory framework encompasses the crypto financial system and reflects the principle of equal risk, equal disclosure, equal regulatory outcome,” said Ms. Brainard.
Brainard said national and international cooperation would be needed, to ensure compliance with existing regulations and to create new ones, he said.