Fed Chairman said that cryptocurrencies don’t have any major implications on the US financial system so far. However, Chairman Powell demanded a stronger regulatory framework.
Amid the recent liqudity and insolvency crisis in the crypto space, regulators have been on an alert mode! On Wednesday, June 22, while addressing the Senate committee, Fed Chairman Jerome Powell said that the US Central Bank is closely tracking all acitivites in the crypto space.
Senator Kyrsten Sinema (D-AZ) questioned Powell about the impact of the recent crypto market volatility on the Fed’s operations. Besides, Sinema also questioned the macroeconomic implications of the crypto market volatility and downturn.
Responding to it, Powell said that the Fed is watching the ongoing situation “very carefully”. The Fed chairman further noted that the U.S. central bank is not seeing any singificant macroeconomic implications, so far. But Powell took the opportunity raising the demand for better regulatory framework. He said:
“I think the principle implication is really what we’ve been saying and what others have been saying for some time, which is that in this very innovative, new space, really there is a need for a better regulatory framework.
The same activity should have the same regulation no matter where it appears, and that isn’t the case right now because a lot of the digital finance products, in some ways, are quite similar to products that have existed in the banking system or the capital markets but they’re just not regulated the same way. So we need to do that.”
ECB President Demands Regulation for Crypto Lending
Ealrier this week, European Central Bank (ECB) President Christine Lagarde demanded for a stronger regulatory framework for the cryptocurrency staking and lending market. Lagarde stated that this sector demands additional regulatory efforts from the European Union.
Referring to the upcoming regulatory package – Markets in Crypto-Assets (MiCA) – Lagarde made a demand for MiCA II. She also warned about the lack of regulations in this market. Lagarde said:
“MiCA II should regulate the activities of crypto-asset staking and lending, which are definitely increasing. Innovations in these unexplored and uncharted territories put consumers at risk, where the lack of regulation is often covering fraud, completely illegitimate claims about valuation, and very often speculation as well as criminal dealings.”
The ECB President also spoke about the decentralized finance (DeFi) market adding that it poses a “real risk to financial stability”. Last month itself, Christine Lagarde had said that crypto are a major threat to the global financial system. “My very humble assessment is that [#crypto] is worth nothing, it is based on nothing – there is no underlying asset to act as an anchor of safety,” she said.
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