US Fed vice chair calls for urgent regulation in cryptocurrency market
Lael Brainard, Vice Chair of the Federal Reserve, has stressed the importance to establish sound regulation for crypto financial systems “now before it becomes so large and interconnected that they might pose risks for the stability of the wider financial system.”
Lael Brainard (Vice Chair of the Board of the Federal Reserve Governors) spoke about crypto regulation and decentralized financing (defi), Friday at a Bank of England conference.
She started by referring to recent volatility in crypto markets, saying that it had “exposed serious vulnerabilities in crypto financial system.” She also stated that both traditional financial and crypto systems are vulnerable to leverage, settlement, maturity, liquidity transformation and opacity.
Brainard emphasized that innovation has the potential to make financial service faster, more affordable, and more inclusive, in ways that are natural to the digital ecosystem.
Before the crypto financial ecosystem grows in size or becomes interconnected, it is crucial to establish the foundations for sound regulation.
Federal Reserve Vice Chair emphasized the importance of international and national cooperation. He stated: “The recent volatility and losses in crypto retail investors highlight the urgent need for compliance with existing regulations, and to fill any gaps or enforce regulations — for example, for decentralized platforms and protocols.
Future financial resilience can be greatly improved if the regulatory perimeter includes crypto financial systems and reflects the principle that same risk, same disclosure, and same regulatory outcome.
Vice chair of the Fed stated that the U.S. central banks digital currency (CBDC), could contribute to financial stability by providing the neutral trusted settlement layer for the future crypto financial system.
The U.S. Treasury Department presented a framework for international engagement regarding crypto assets to President Joe Biden on Thursday. This was in accordance with the March executive order. The Treasury stressed that it was important to work with international allies in order to create global crypto standards for digital asset regulation.
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