The top US banking regulator at the Federal Reserve is urging Congress to pass legislation that would enforce regulation on cryptocurrencies in the wake of the rapid collapse last week of a major crypto exchange, FTX.
Michael Barr, the Fed’s vice president for supervision, said in prepared testimony released Monday that “recent events in cryptocurrencies … have exposed investors and consumers risks associated with new and novel asset classes and activities when accompanied by strong railings.” No.”
Barr, who took office in July, will testify before Congress on Tuesday for the first time as vice president. He did not specifically mention FTX in his written remarks.
Yet their attendance comes in third only after FTX crypto currency The exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy on Friday. The collapse of FTX has caused a stir throughout the crypto world, with lender BlockFi halting customer withdrawals.
“Some financial innovations offer opportunities, but as we have seen recently, many innovations also carry risks,” Barr said. They include runs on deposits, collapse of property values, misappropriation of customer funds, fraud, theft, manipulation and money laundering, he added. ,
“These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said.
the fall of ftx Happened outside the banking system, Barr said, a focus of his watch.
“But recent events remind us of the potential for systemic risk if the interrelationship between the crypto system that exists today and the traditional financial system develops,” he said.
With regard to the banking system as a whole, most large banks have healthy levels of cash reserves, Barr said, well beyond the need for regulation.
But as the economy slows and the Fed raises interest rates faster, banks could come under more stress, he said.
“The economic outlook has weakened,” increasing uncertainty, Barr said. “A weak economy can put a strain on homes and businesses and, thus, on the banking system as a whole.”
This story has been published without modification in text from a wire agency feed. Only the headline has been changed.
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