Fed governor explains who needs crypto regulation and why demand for it is growing

Fed governor explains who needs crypto regulation and why demand for it is growing

Christopher Waller, United States Federal Reserve Board Governor, spoke to an audience at the SNBCIF Conference on Cryptoassets and Financial Innovation, Zurich, Switzerland. He said that regulation is necessary to open crypto ecosystem to a wider public. Waller stated that financial intermediaries can manage risk for crypto users but cannot eliminate it. Waller also said that new, fast-growing financial products require public confidence in order to survive.

Waller used historical examples to illustrate the link between technological innovation, regulation, and the accumulation of fortunes. Waller stated that new technology and the absence of clear rules meant that some fortunes were created, even if others were lost.

Waller said that experienced investors are able to work in unregulated markets and may not require or want regulation. Waller cited a Fed survey which showed that only 12% of Americans own crypto-assets despite the recent boom in crypto-assets. 99% of those who do have crypto are holding it for investment.

Related: How does crypto affect the Fed? Find out on The Market Report

Because of the potential for disputes between new crypto users and existing intermediaries in the financial markets, these intermediaries may need regulation. Waller said: “When ordinary investors lose their life savings for no other reason than wanting to participate on a hot market,” demands for collective action can quickly mount.

The central banker suggested that these demands could lead to the socialization individual losses such as the need to reimburse small investors who suffered losses due the the Terra (LUNC) ecosystem collapse. This leads to increased demands for regulation to prevent similar situations from happening again.

Waller suggested that the widest possible access to the crypto ecosystem should be allowed.

“[…] The question is not about what experts in that ecosystem want, it’s about what all the public needs to feel safe and secure.

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