WASHINGTON (AP) – The top United States (US) banking regulator at the Federal Reserve (Fed) is urging Congress to pass legislation that would impose regulation on crypto currencies in the wake of the swift collapse last week of FTX, a leading crypto exchange.
Fed’s Vice Chair for Supervision Michael Barr said in prepared testimony released on Monday that “recent events in crypto… have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails”.
Barr, who took office in July, testified before Congress yesterday for the first time as vice chair. He did not refer specifically to FTX in his written remarks.
Yet his appearance comes after FTX, the third-largest crypto currency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy on Friday. The fall of FTX has rippled throughout the crypto world, with lender BlockFi pausing customer withdrawals.
Barr said, “Some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks.” Those include runs on deposits, collapsing asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering, he said.
“These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said.
