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Cryptocurrencies: Top Fed Financial Regulators Push for Regulation


HO CHI MINH CITY –

The top US banking regulator at the Federal Reserve is urging Congress to pass legislation imposing regulation on cryptocurrencies following the rapid collapse last week of FTX, an exchange top cryptocurrencies.

Michael Barr, the Fed’s vice president of oversight, said in prepared testimony released Monday that “recent events in cryptocurrency … have highlighted the risks to investors. investors and consumers in relation to new and new activities and asset classes when not accompanied by robust protections.”

Barr, who took office in July, is expected to testify before Congress for the first time as vice president. He did not specifically mention FTX in his written comment.

His arrival, however, comes after FTX, the third-largest cryptocurrency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy on Friday. The fall of FTX has spread throughout the crypto world, with lender BlockFi halting customer withdrawals.

“Some financial innovations present opportunities, but as we’ve seen recently, many also carry risks,” Barr said. Those include withdrawals of deposits, devaluation of assets, misuse of customer funds, fraud, theft, manipulation and money laundering, he said.

“These risks, if not well managed, can harm retail investors and go against the goals of a safe and fair financial system,” Barr said.

Barr noted that the collapse of FTX occurred outside of the banking system, a focus of his oversight.

“But recent events remind us of the potential for systemic risk if linkages develop between the cryptocurrency system that exists today and the traditional financial system,” he said.

In terms of the banking system as a whole, most large banks have healthy levels of cash reserves, Barr said, far beyond what is required by regulation.

But with the economy slowing as the Fed quickly raised rates, banks could experience more stress, he said.

“The economic outlook has softened,” Barr said, adding that uncertainty was growing.

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