The FED Chair Lael Brainard urges faster and improved crypto regulation and also noted that if crypto remains unregulated as it is integrated into the larger financial system, it will bring risks of instability of the types that are seen now so let’s read more today in our cryptocurrency news.
The United States Federal Reserve Board vice-chairperson Lael Brainard urges faster and improved crypto regulation while speaking to an audience at the Bank of England in London. Crypto has the same risks as traditional finance and needs better guide rails as Brainard claimed, pointing to the downturn in the marekt as proof.
Brainard spoke in general terms in her speech and she outlined the recent performance issues in crypto like the correlation with risky equities, volatility, and liability to bank runs as well as other risks with traditional finance. As crypto becomes more integrated into the financial system, the need for regulation in response of the risks will become more urgent. Brainard endorsed the principle of the same risk, disclosure, and regulatory outcome but she also urged better international cooperation among the financial regulators in order to deal with the cross-border scope of the industry. The latter appeal echoed the conclusion of the US Treasury Department reports.
Two main areas aroused concerns in the FED official. The first was the bank’s involvement with the crypto increases of risk and stability of the entire system. Brainard said bank involvement should be encouraged because it provides an interface where the regulators have a better look at the situation. In spite of the endorsement of the same risks, she seemed to argue for different treatment for crypto and noted a strogn regulatory framework for the financial space that was necessary to advance some stronger bank involvement.
Stablecoins are the second area of risk spillover and Brainard called them a bridge between crypto and fiat, noting that the top stablecoins account for 80% of the marekt cap. The fiat-backed stablecoins are still vulnerable to runs and Brainard saw vulnerability to runs:
“A digital native form of safe central bank money could enhance stability by providing the neutral trusted settlement layer in the future crypto financial system.”
She has interoperability between the stablecoins as a use for the neutral settlement layer and pointed out that the crypto offers cheaper services but the costs that regulation entails are worth it.