Fed’s Waller Says Cryptocurrency Buyers Could Lose Their Entire Investment

The Governor of the Federal Reserve, Christopher Wallerwarned on Friday those who participate in assets of cryptocurrency that they could lose their investments, and banks that must protect themselves from malicious agents and risks to the Finance system.

In recent months, the cryptocurrency industry has been rocked by massive losses for investors, bankruptcies of cryptocurrency exchanges, lenders and payment platforms, and high-profile court cases, including a criminal case against the founder of FTX, Sam Bankman-Fried.

US regulators, including the central bank, have told banks they need to be more careful about fraud risk.

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In remarks prepared for presentation at a Global Interdependence Center conference, Waller said the effects on the broader financial system so far have been “minima” and that it is essential that regulators ensure that they mitigate financial stability risks associated with tensions in the cryptocurrency sector.

At the same time, he said, banks considering participating in cryptocurrencies must meet the requirements of “know the customer” and anti-money laundering, and ensure that they monitor clients’ business models and risk management systems, so that the bank “don’t leave empty-handed” if there is a cryptocurrency crash.

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Waller issued an even stronger warning to cryptocurrency traders: As assets with no intrinsic value, they are risky.

“If people want to have an asset of this type, go ahead”Waller said. “However, if you buy crypto assets and the price hits zero at some point, please don’t be surprised and don’t expect taxpayers to socialize their losses.”

Source: Reuters

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