Crypto regulation would protect whole society: Fed governor

ANKARA

US Federal Reserve Governor Christopher Waller said Friday the regulation in the cryptocurrency market would protect the society as a whole.

"The main issue in crypto-asset regulation isn't how to protect sophisticated crypto-investors; it's how to protect the rest of us," he told at the SNB-CIF Conference on Cryptoassets and Financial Innovation held in Zurich, Switzerland.

Waller said the crypto market showed an incredible growth in the past five years, from platforms, instruments, and alternative means of payment to the decentralized finance, rising public awareness and governments' attention.

Many crypto-related products and services, however, "fall between the cracks" of traditional legal and regulatory structures, he said.

"In that environment, the normal backstops and safety nets of traditional finance do not necessarily or reliably apply. High volatility is the rule, not the exception; fraud and theft occur regularly, often at large scale. Your whole pot is always on the table; you take part at your own risk," he explained.

Waller emphasized that new practices and technologies can disrupt, or improve, older and calmer markets, and added that society usually wants to regulate new and poorly understood financial product markets.

"(Regulation) is not to protect high-net-worth investors but to protect society from the often-irresistible pressure to socialize the losses of investors with limited resources, and to limit the spread of financial stress," he said.

"If we want to allow broad access to the crypto ecosystem, then the question isn't about what experienced users of that ecosystem want – it's about what the rest of the public needs to have confidence in the ecosystem's safety, and for better or worse, you can't program confidence," he explained.