Better regulation of the fast-growing world of crypto assets is not necessary to prevent wealthy people from losing money, but for the sake of everyone else, Federal Reserve Governor Christopher Waller said Friday.
“The main problem in regulating crypto assets is not how to protect sophisticated crypto investors, but how to protect the rest of us,” Waller said in comments prepared for delivery to the SNB-CIF conference on crypto assets and financial innovation in Zurich.
Specifically, he said, the goal of regulation would be “to protect society from the often irresistible pressures to socialize the losses of investors with limited resources and limit the spread of financial stress.”
In the past five years, crypto assets have grown from a niche market worth about $14 billion to a $3 trillion industry.
Several high-profile collapses in the crypto world have recently sparked calls for better guardrails for what is essentially an unregulated market. One reason: their popularity.
A recent Fed survey found that about 12 percent of American adults used or held cryptocurrencies in the past year, primarily for investment purposes. Other studies suggest that the number of crypto users is even higher.
In March, President Joe Biden ordered the Treasury and other agencies to begin looking at how best to regulate the sector, even as central banks around the world — including the Fed — are exploring the possibility of a central bank backed digital currencies.
Waller is among those at the Fed who say they see no reason to issue a central bank digital currency that would compete with privately backed digital currencies.
On Friday, he explained his rationale for why those privately-backed currencies need closer scrutiny, despite industry arguments that markets should be left to fend for themselves to foster more innovation.