LONDON–Federal Reserve Vice Chair Lael Brainard is calling for regulation around cryptocurrencies to reduce risk to the overall financial system.
In remarks to a Bank of England conference in London, Brainard said she is supportive of innovation as it has the potential to make financial services “faster, cheaper and more inclusive, and to do so in ways that are native to the digital ecosystem.”
But, she added, "It is important that the foundations for sound regulation of the crypto financial system be established now before the crypto ecosystem becomes so large or interconnected that it might pose risks to the stability of the broader financial system."
‘Confusing & Troublesome’
According to Brainard, a lack of regulation and guidelines has been a confusing and troublesome issue for the crypto industry, which has been seeking to grow and expand but which is also “unclear on the regulatory parameters within which they can do so,” noted CNBC.
As CUToday.info has reported, the growth in crypto has slowed, with the price of bitcoin now about 70% below where it was at its November 2021 high of $68,982.20.
During her remarks, Brainard did cite the volatile nature of cryptocurrency prices, and also pointed to recent events that have put additional pressure on values as well as added to negative sentiment, including the collapse of Terra.
‘The Right Time’
"New technology and financial engineering cannot by themselves convert risky assets into safe ones," Brainard said. “Despite significant investor losses, the crypto financial system does not yet appear to be so large or so interconnected with the traditional financial system as to pose a systemic risk. This is the right time to establish which crypto activities are permissible for regulated entities and under what constraints so that spillovers to the core financial system remain well contained.
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