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According to the Vice President of the Fed | Similar risks for cryptocurrencies and traditional finance

(New York) The recent turbulence in the world of cryptocurrencies has shown that this sector presents risks similar to those of traditional finance and must, when it is the case, be subject to the same rules, said Friday the vice president of the American central bank (Fed), Lael Brainard.

Posted July 8

Bankruptcy of the cryptocurrency lending specialist Voyager Digital, collapse of the theoretically stable cryptocurrency Terra, liquidation of the Singaporean investment company Three Arrows Capital, suspension of withdrawals by the investment platform Celsius: several companies found themselves in turmoil with the sharp drop in the value of bitcoin and other virtual currencies since May.

“Despite significant losses for investors, the crypto financial system does not yet appear to be so large or so interconnected with the traditional financial system that it poses systemic risk,” Brainard, according to the text of a speech she was to deliver in London.

Fed Governor Christopher Waller also pointed out Thursday that despite the plunge in virtual currencies, no bank or investment company seemed to be in danger.

“This does not mean that if (the crypto system) was ten times bigger, it would have no effect”, he however underlined during a public intervention.

In this context, “now is a good time to ensure that similar risks are subject to similar regulations and transparency rules, in order to help investors distinguish between genuine and responsible innovations and fake lure of seemingly easy returns but in fact carrying significant risk,” Brainard.

For example, it became clear that claims that cryptocurrencies could be a way to hedge against inflation or did not move in the same direction as other risky asset classes were wrong, he said. she advanced.

Two elements must be particularly monitored in his eyes: the involvement of traditional banks in the world of cryptocurrencies and so-called stable cryptocurrencies because their course is theoretically linked to that of a traditional currency.

“It is important that the foundations for sound regulation of the cryptocurrency-related financial system be established now before (it) becomes so large or interconnected that it poses risks to the stability of the financial system as a whole” , concluded Brainard.



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