A key exec from the US Federal Reserve warned investors this week that cryptocurrency prices could plummet to zero in the future.
Fed governor Christopher J Waller said in a recent speech at the Global Interdependence Center:
“To me, a crypto asset is nothing more than a speculative asset, like a baseball card. If people believe others will buy it from them in the future at a positive price, then it will trade at a positive price today. If not, its price will go to zero.”
He continued: “If people want to hold such an asset, then go for it. I wouldn’t do it, but I don’t collect baseball cards, either […] If you buy crypto assets and the price goes to zero at some point, please don’t be surprised and don’t expect taxpayers to socialize your losses.”
Waller continued, explaining that several major “crypto-related firms,” which included “payment platforms, exchanges, crypto lenders, and hedge funds” had filed for bankruptcy. He added that retail and institutional investors faced difficulties due to the ongoing crypto winter.
He also criticised banks and other financial institutions facilitating cryptocurrency trading. He stated such organisations backing crypto transactions presented “a heightened risk of fraud and scams, legal uncertainties, and the prevalence of inaccurate and misleading financial disclosures.”
Waller later urged that banks joining cryptocurrency trading programmes should meet Know Your Customer (KYC) and anti-money laundering obligations.
He concluded that “spillovers” across the financial system had been “minimal.”
Fed Comments on Bank-Crypto Collaborations
The news comes after Michael Barr, Federal Reserve vice chairman of supervision, warned banks accepting cryptocurrency deposits should remain aware of increased liquidity risks.
In a speech in October, he said the Fed was working with regulatory groups to note risks to crypto-backing banks across the financial industry.
Barr stated at the time: “The recent volatility in crypto markets has demonstrated the extent of centralization and interconnectedness among crypto-asset companies, which contributes to amplified stress. While banks were not directly exposed to losses from these events, these episodes have highlighted potential risks for banking organizations.”
