In recent times, regulators and politicians across the globe have expressed the importance of solid regulation for the crypto sector, including in the United States. The regulators in the US have insisted on developing a framework for the digital assets sector to protect the financial system. Still, the governor of the Federal Reserve System seems to disagree.
On Wednesday, while addressing the audience at an event Lisa Cook, governor of the Fed, thinks that new regulations are unnecessary.
According to her, the failure of several big-shot digital assets platforms has not impacted the broader financial system citing the example of an unaffected banking system following the alleged collapse of FTX. She also refers to it as evidence that the regulators possess tools to prevent spillover from the issues in the digital assets sector, including the crypto and stablecoin markets.
In her speech, she highlighted that no crypto crisis had fueled a financial crisis; hence the existing regulations and examinations and the potential intersection between crypto and banking activities have played their role. Currently, the crypto industry stands for only a fraction of traditional finance at about $900 billion in total market capitalization.
Cook also stated that there might not be a need for very different types of crypto regulation; instead, there might be a need for efficiency from the regulators in implementing and adhering to the existing regulation.
“Maybe we just need to do the job already within our power.”
Further, the governor stated that the financial system has emerged from a pandemic-induced recession, primarily due to Fed monetary policy; however, that aggressive action would now be eased.
Cook also stated that there are ample funds in the financial system to satisfy the central banking system. Experts see the governor’s comments in the bullish frame as the central bankers of one of the largest nations don’t see crypto as a threat to the traditional financial system.
“There is adequate capital in the system, and I think this is something that the Federal Reserve is satisfied with.”
On Tuesday, Gerome Powell, chair of the US central bank, also said that the institution is looking forward to easing its pace of tightening monetary policy as soon as possible, likely in December. This could bring relief to the risk-on assets such as crypto, given the market is already witnessing signs of recovery.
Analysts suggest that the Crypto markets have displayed impressive momentum in response to the comment of the Fed governor. The total market capitalization rose over $900 billion for the first time following the collapse of FTX and has gained over 10% since the bottom on November 22. However, there are speculations that the coming year will witness strict regulation of the sector.
Fed executives have not always been seen in a positive light in relevance to crypto, given their criticism of the sector. Neel Kashkari, president of the Minneapolis Federal Reserve Bank, recently stated that the notion of crypto is nonsense. It is not useful for payments, no inflation hedge, no scarcity, and no taxing authority. He also calls it a tool of speculation and greater fools.