Parts of the crypto universe should be encouraged to thrive as long as they don’t threaten the U.S. banking system, said Christopher Waller, a Federal Reserve Board governor, who also shared an optimistic note that the young industry will work out its problems.
Waller, echoing other U.S. regulators who have cheered their success at protecting the financial system from the cryptocurrency sector’s woes, said Friday that the fallout from the FTX collapse and other recent firm failures hasn’t caused significant damage to the system the Fed oversees.
“The lack of spillovers to date may be attributable in part to the relatively limited number of interconnections between the crypto ecosystem and the banking system,” he said at a Global Interdependence Center event in California.
“I’m supportive of prudent innovation in the financial system, while at the same time concerned about banks engaging in activities that present a heightened risk of fraud and scams, legal uncertainties, and the prevalence of inaccurate and misleading financial disclosures,” he said. A bank that wants to involve itself in crypto, “would have to be very clear about the customers’ business models, risk-management systems, and corporate governance structures to ensure that the bank is not left holding the bag if there is a crypto meltdown.”
Waller, who was nominated for his job by former President Donald Trump, said he expects the digital assets industry to mature and work out its governance, risk management and transparency issues.
“They’ll get there, and when that happens, there’s a lot more ability to think about interacting crypto into the traditional financial sector,” he said, noting he’s not in a hurry to get involved personally.
“To me, a crypto-asset is nothing more than a speculative asset, like a baseball card,” he said. “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.”
Waller’s also not convinced that letting the Fed form a central bank digital currency (CBDC) is a good idea. He said nobody has yet made a convincing case that there’s a problem that a digital dollar is uniquely able to solve.
“I don’t see a really big value gain from doing this,” he said, adding that he doesn’t think it’s the role of the seven unelected Fed governors to decide and that he’s waiting for orders from Congress.