Fed’s Waller Says Crypto Regs Protect ‘Society’

Federal Reserve Governor Christopher Waller has said greater crypto asset regulation would help everyone, rather than just keeping rich people from losing money, Reuters wrote Friday (June 3).

Waller said that the main issue is “how to protect the rest of us.” In his opinion, the aim of the regulation would help protect society from “the often-irresistible pressure to socialize the losses of investors with limited resources, and to limit the spread of financial stress.”

All of this comes after several big collapses in the crypto world, including that of the UST stablecoin. Because of the troubles, several officials have said there needs to be more guardrails in place for a basically unregulated market.

The popularity of the digital coins is a factor, as around 12% of U.S. adults have used or held the digital assets in the last year, primarily for investments — and the real number of crypto users is likely higher.

There has also been some debate around issuing a central bank digital coin (CBDC), which Waller said might not be needed.

According to Fed Vice Chair Lael Brainard, a U.S. CBDC wouldn’t cut banks out of the banking system as some of them feared.

See also: Fed’s Vice Chair Tells Banks: Digital Dollar Won’t Cut You Out

The Fed hasn’t been jumping to pursue the idea, but it has had to field the worries and anger of the banking industry over the possibility of the digital coins, with the threat of draining millions from the banks or helping to bypass them entirely.

The Bank Policy Institute has said that by attracting deposits away from banks, a CBDC could “undermine” the system. However, Brainard said this is unlikely to happen, with a firm stance on the matter.

“It’s very important to consider the risk of bank intermediation,” Brainard said. “A vibrant healthy banking system with banks of all sizes is very important to the economy and to the Federal Reserve.”

She added that any action they took on digital dollars or other such things would come with the consideration for the banks. Brainard said it would likely take some time to even get a CBDC ready if the government did pursue the option.