Brainard talked The most common term for her entire speech. She highlighted the performance issues recently seen in cryptocurrencies, such as volatility, correlation with high-risk equities, bank runs and other risks associated with traditional finance, and over-collateralization as a stress amp. As cryptocurrencies are integrated into larger financial systems, the need for regulation to address these risks becomes more urgent, she said.
Brainard endorsed “the same risk, the same disclosure, the same regulatory outcome principle”. She also encouraged international cooperation between financial regulators to address the cross-border scope of the crypto industry.The charm of the latter Reflects the conclusions of the U.S. Treasury report Released a day ago.
Two specific areas have raised special concerns for Fed officials. First, the involvement of banks in cryptocurrencies increases the risk of stability of the core financial system. Brainard said banks need to be encouraged to “provide an interface where regulators have a strong eye.” Despite her support for the “same risk, same disclosure” principle, she seems to insist on different treatments of crypto here, “crypto finance” before banks make significant involvement. He emphasized the need for a “strong regulatory framework”.
According to Brainard, stablecoin is the second area of risk spillover. She called them the bridge between cryptocurrencies and fiat money, and said that the top two stablecoins make up 80% of market capitalization. Stablecoin backed by Fiat is “very vulnerable to execution,” she said.
Brainard states the important role of the central bank’s digital currency (CBDC):
“The digital native form of secure central bank money can increase stability by providing a neutral and reliable payment layer for future crypto finance systems.”
She offered interoperability between Stablecoins as a potential use for that neutral payment layer. Finally, Brainard pointed out that crypto offers a cheaper service among its benefits, but the cost of regulation is worth it.
Vice-Chairman of the Federal Reserve Board, Lael Brainard, told the audience at a Bank of England conference in London on Friday. Brenard argued that crypto had the same basic risks as traditional finance and needed a “strong guardrail,” pointing out the recent market downturn as evidence.