Fed Governor Warns Crypto Investors: ‘Don’t Expect Taxpayers to Socialize Your Losses’

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On Friday, Federal Reserve Governor Christopher Waller issued a warning about the risks of cryptocurrencies, saying they are “nothing more than a speculative asset, like a baseball card.”

“If you buy crypto-assets and the price drops to zero at some point, don’t be surprised and don’t expect taxpayers to socialize your losses,” Waller said in a speech at a conference. hosted by the Global Interdependence Center on Friday.

Waller made the comments as regulators begin to take more action to tighten oversight of the crypto market, after a number of major companies collapsed in recent months, resulting in billions of dollars in customer losses. and shaking up the fledgling industry.

Waller compared cryptocurrencies to baseball cards and celebrity autographs, saying they have little to no intrinsic value, with prices depending solely on demand.

“If people believe that others will buy (a crypto) from them in the future at a positive price, then it will trade at a positive price today. Otherwise, its price will drop to zero,” Waller said. “If people want to own such an asset, then go for it. I wouldn’t, but I don’t collect baseball cards either.”

Bitcoin BTCUSD, +1.24% lost 1.4% in the past 24 hours to around $21,589 on Friday. It’s up more than 30% so far this year, but is still down almost 70% from its all-time high.

Waller also said banks that interact with crypto customers should exercise caution to ensure they “are not left with the bag” if there is more of a meltdown in the crypto industry. cryptography.

These comments followed a series of actions by different regulators targeting crypto companies. On Thursday, the United States Securities and Exchange Commission accused crypto exchange Kraken of failing to register its staking program as securities. Kraken terminated the program for US customers and agreed to pay $30 million to settle the charges, without admitting or denying the allegations.

Read: Crypto industry fears staking ban, as some turn to bitcoin: ‘It’s always been on the safe side of regulation’

Meanwhile, the New York Department of Financial Services is reportedly investigating stablecoin issuer Paxos, according to a report from CoinDesk on Thursday. The scope of the investigation remains unclear.

Paxos did not respond to a request for comment. The NYDFS said it could not comment on ongoing investigations.

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