The Fed urged to tighten regulation of the cryptocurrency industry

Cryptocurrency industry needs tighter regulation as digital asset market collapsesbecame evidence of the presence of “serious vulnerabilities” in the industry. This was stated by Fed Vice Chairman Lael Brainard at the Bank of England conference, reports the Financial Times.

In her opinion, due to the relatively smallThe size of the market and the weak relationship with the classical economic system of cryptocurrencies do not yet threaten financial stability. At the same time, regulators need to provide a regulatory framework to protect investors, Brainard added.

“Despite the fact that the crypto-financial systemcontrasted with the classical one, it turned out to be subject to the same risks that we are well familiar with in traditional finance […]. As we work to ensure financial stability, it is important that the regulatory perimeter covers cryptocurrencies,” she said.

Brainard doubted that Bitcoin is a hedge against inflation. The vice chair noted that cryptocurrencies are highly correlated with high-risk assets.

The official also said that supervisors should pay special attention to stablecoins. According to her, the collapse of the Terra ecosystem resembles a classic example of a banking panic. 

She stressed that "stablecoins" are extremely vulnerable to this kind of crisis. As an example, Brainard cited the May outflow of funds from USDT from Tether.

In June 2022, Fed Chairman Jerome Powellsaid that against the backdrop of market volatility, the agency is closely monitoring cryptocurrencies. He noted that the industry does not yet have a significant impact on the macroeconomics.

Recall that in May, candidate for the post of Vice Chairman of the Federal Reserve, Michael Barr, called for the development of a regulatory framework to regulate stablecoins.

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