The View Chairperson of the United States Federal Reserve, Lael Brainard has said that urgent legislation must be enacted to regulate the crypto industry.
Brainard expressed concern that the Industry might soon pose a risk to the financial stability of the financial system.
Speaking at the Bank of England Conference in London, Brainard urged the country must establish foundational regulations for the crypto Industry before it becomes too advanced to regulate.
Referring to the recent collapse of the Terra Luna token, Brainard said that tokens such as cryptocurrencies cannot by themselves convert risky assets into safe ones.
“The Terra crash reminds us how quickly an asset that purports to maintain a stable value relative to fiat currency can become subject to a run,” she said. “The collapse of Terra and the previous failures of several other unbacked algorithmic stablecoins are reminiscent of classic runs throughout history. New technology and financial engineering cannot by themselves convert risky assets into safe ones.
“As we consider how to address the potential future financial stability risks of the evolving crypto financial system, it is important to start with strong basic regulatory foundations, “The recent turbulence and losses among retail investors in crypto highlight the urgent need to ensure compliance with existing regulations and to fill any gaps where regulations or enforcement may need to be tailored—for instance, forbdecentralized protocols and platforms,” she stated.
Earlier this week, a panel of speakers hosted by the U.S. Federal Reserve recommended that crypto-assets be allowed to flourish in the U.S. economy.
This, they said would further strengthen the dollar’s status.
