Fed President Brainard calls for regulating cryptocurrencies as fast as possible

The cryptocurrency sector needs strong regulation before it becomes so widespread that it poses financial stability risks, Federal Reserve Vice Chair Lael Brainard said on Friday, adding that recent turmoil in the space shows that cryptocurrencies suffer from the same risks as the traditional financial sector.

"It is important that the foundations for robust regulation of the crypto financial system are established now, before the crypto ecosystem becomes so large or interconnected that it could pose risks to the stability of the wider financial system," Brainard said at a Bank of England conference in London. He called for regulation. The risks of loosely regulated cryptocurrencies and stablecoins operating in a legal gray area have come into focus with the sharp fall of the crypto market and the collapse of the major "stablecoin" TerraUSD. The leading cryptocurrency bitcoin has fallen more than 75% from its all-time high over the past seven months. According to media reports, the collapse has brought down several major crypto companies, including Celsius Network, which has suspended customer withdrawals and may be looking to restructure. Meanwhile, Toronto-listed Voyager Digital (VOYG.TO) and Singapore-based crypto hedge fund Three Arrows Capital filed for bankruptcy this month. While the crypto industry has touted digital assets as fundamentally different from traditional finance, Brainard said the industry has proven that it is susceptible to the same risks and should be subject to the same rules. These risks include leverage, fire sales, opacity, maturity and liquidity mismatches, and contagion, Brainard said, adding that new technologies and financial engineering alone cannot turn risky assets into safe assets. "If we ensure that the regulatory environment covers the crypto financial system and reflects the same risk, same disclosure, same regulatory outcome principle, future financial resilience will be greatly enhanced," Brainard said. Brainard added that national and international cooperation will be needed to ensure compliance with existing regulations and adapt new ones. Source: Reuters   You may also be interested in: Cryptocurrency leader Bitcoin (BTC) rose 15% last week, while Ethereum, the second on the list, rose 22%. After weeks in the red, crypto leaders Bitcoin and Ethereum are showing signs of recovery. Bitcoin, the world’s largest cryptocurrency by market capitalization, rose nearly 10% last week to $22,314, according to CoinMarketCap data. BTC rose 6% during the day on Thursday. At the time of writing, the Bitcoin price was at $21,323. https://ieconomy.io/en/cryptocurrency-market-recovers-bitcoin-increased-6-ethereum-increased-7/