Fed President: Crypto Industry is a ‘mess’, but progress should not be snuffed out

The Fed Chairman stated that he still warned banks to be careful when doing business with companies in the crypto industry.

Fed Chairman: Crypto industry is a ‘mess’, but progress should not be snuffed out. Anhr: Bloomberg

Participating in a periodical hearing before the Banking Committee of the US Senate on March 7 (US time), the Chairman of the US Federal Reserve (Fed) Jerome Powell answered a series of questions from investors. Legislation on a Crisis of the Cryptocurrency Industry in 2022.

Mr. Powell’s general view is that while he doesn’t want to stifle the progress that can be made in the crypto space, in its current state, it is a place of risk and lack of regulation.

The Fed Chairman said:

“Like everyone, we’ve seen what’s happened in the crypto industry and seen a lot of chaos, scams, lack of transparency, liquidity risk, we see a lot of that. . What we’re doing is making sure the financial institutions that are under our control are careful when dealing with that sector.”

The Fed and US regulators in early 2023 issued a warning to banks that are providing services to crypto companies, pointing out a number of risks to watch out for.

However, recently, Silvergate Bank has announced a delay in filing periodic reports with the SEC, leading to many speculations that it is the next name affected by the chain of crypto market collapse. Silvergate’s partner crypto companies quickly cut ties with the bank.

Even so, Mr. Powell acknowledged that there could still be useful innovations coming from the crypto industry.

“We should be open to the idea that there are still technologies that underpin life-improving inventions. We should not extinguish it.”

Another topic of great interest is the “big question mark” about the future of stablecoins, cryptocurrencies pegged to the US dollar (USD). The Fed Chairman said that stablecoins also need to be carefully monitored.

“The public will want something that looks like a managed money market fund or a bank deposit. Hence stablecoins should receive such attention.”

Mr. Powell said stablecoins could become part of the financial industry if fully regulated, but expressed concern about the risks of public blockchains such as vulnerability to fraud, money laundering and illegal activities. However, in the past, the Fed has stated that it is open to the possibility of issuing a CBDC, or central bank-managed cryptocurrency.

Also on the evening of March 7, the Chairman of the US Federal Reserve made the latest assessment on the inflation situation in the world’s largest economy, which is still much higher than the target of bringing inflation to 2. % of this agency, so it can continue to raise interest rates to higher than previous projections. Both Bitcoin, the cryptocurrency market, and the US stock market have seen their volatility plummet because of Mr. Powell’s comments.

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