Fed Vice-President Lael Brainard at the Bank of England conference crypto assets talked about.
“Crypto-Assets and Decentralized Finance for Financial Stability” The headlines of Brainard’s statements are as follows:
“Recent volatility has shown serious vulnerabilities in crypto assets.
As we work to future-proof our financial stability agenda, it is important to ensure that the regulatory environment covers cryptoassets.
New technology often carries the promise of increasing competition in the financial system, reducing transaction costs and payment times. But in the beginning, new products and platforms are often fraught with risks, including fraud and manipulation. It is important and difficult to distinguish between fraud and value.
We are closely following the latest events where the risks in the system have crystallized and many crypto investors have lost.
Despite significant investor losses, the crypto financial system does not yet appear to be large enough or interconnected with the traditional financial system to pose a systemic risk.
Therefore, we must ensure that similar risks are subject to similar regulatory implications and similar disclosures to help investors distinguish between real, responsible innovation and the false lure of seemingly easy returns that hide significant risks.
of bitcoin Its price fell as much as 75 percent from its all-time high and dropped almost 60 percent in the three months from April to June. Many of the other leading crypto-assets have experienced even sharper declines over the same period. Contrary to claims that cryptoassets are an inflation hedge or an uncorrelated asset class, cryptoassets have plummeted in value and have proven to be highly correlated with riskier stocks and risk appetite more generally.
Terra’s collapse and the previous failures of several other unsupported algorithmic stablecoins resemble classic collapses throughout history. New technology and financial engineering alone cannot transform risky assets into safe assets.
Recent turbulence and losses among retail investors in crypto, demonstrates the urgent need to ensure compliance with existing regulations.
While applying the principle of “same risk – same regulatory outcome”, we must provide basic protections for consumers and investors. According to a number of studies, retail users should be protected against abuse, undisclosed conflicts of interest and market manipulation.
Conclusion:
Innovation has the potential to make financial services faster, cheaper and more inclusive, and to do so in ways unique to the digital ecosystem.
Responsible innovation will require regulations to cover cryptoassets and appropriately address new risks associated with new technologies.
It is important that the foundations are now laid for the sound regulation of the crypto financial system before the crypto ecosystem becomes so large or interconnected that it can pose risks to the stability of the wider financial system.”