The cryptographic space is gaining more and more attention recently. As usual, government officials are highlighting possible ways in which the new class of promotion is detrimental to retail investment and why the sector needs regulation.
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The collapse of the Terra ecosystem, now called Terra Classic, provided critics with fresh ammunition. Of course, cryptographic detractors won’t let you down. They will repeat it in what looks like an infinite loop.
At the conference of the Swiss National Bank (SNB) and the EU Investment Fund (CIF) on cryptocurrencies and financial innovation, US Federal Reserve (EDF) Governor Christopher Waller spoke about the “main problem” in regulating it. asset class.
Waller acknowledged that by “any measure,” the industry has experienced “incredible growth” over the past five years. Digital assets have expanded their narratives from a “means of payment” to a complete alternative to the current financial system.
The Fed governor said “innovation is happening fast” in this sector. This has created a gap between the fledgling asset class and traditional rules and regulations. Waller said:
In that environment, the normal backing and safety nets of traditional finance do not necessarily or reliably apply. High volatility is the rule, not the exception; frauds and thefts occur regularly, often on a large scale. Your whole pot is always on the table (…).
Experienced traders and investors, the Fed governor continued, are able to mitigate or navigate through the risks. They can thrive and often argue that all markets have associated risks. Therefore, they reject the implementation of the regulations, or consider them “counterproductive,” according to Waller.
However, the Fed governor says the rules are being implemented to protect retail investors. An EDF survey states that 12% of adults in the United States bought and maintained cryptocurrencies last year.
90% of those investors said they bought cryptocurrencies for “investment purposes.” These results are conservative, Waller said, but they reflect the popularity of this industry and the potential danger to retail investors.
Are cryptographic losses “morally” intolerable?
According to the Fed governor, when retail investors, people with little experience in smart contracts, cryptocurrency trading or DeFi platforms, lose money, it can affect the individual and society alike. In that case, he argued, it becomes a social responsibility of society to prevent them from making this mistake again.
At this point, the Fed governor said, the result becomes “practically, politically or morally intolerable” and must be prevented from spreading and causing a shock to the system. Waller used the collapse of the Earth ecosystem to defend his argument:
We saw it just a few weeks ago after what can only be described as a race into the Earth ecosystem, when everyday users sought restitution and even experienced DeFi players discussed ways to compensate retail investors. This leads us to the main reason, in my view, that society wants to regulate new and misunderstood markets for financial products.
Regulation and control become a public necessity, Waller said. He says that despite the innovation and potential of digital assets, especially stable currencies, “confidence cannot be programmed.”
However, the Fed governor did not point out the losses suffered by retail investors in traditional financial markets, nor the fact that cryptography has been calling for a clear legal framework for operating in the United States. More than solutions, the industry has been laid off or simply treated as a borderline criminal.
On the losses experienced by retail investors, as traditional companies tend to fall in the S&P 500 and Nasdaq 100 index, the US Federal Reserve has its fair share of responsibility.
The Fed knew how this was going to unfold and that it was going to be HARD! Otherwise, there is no reason to throw the “conflict of interest” card at the top.
So this means that they have a plan and should not overreact.
BUT Biden panics and asks the Fed to be more aggressive. pic.twitter.com/NYsacrGccm
– Materials Scientist (@Mtrl_Scientist) June 4, 2022
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At the time of writing, BTC is priced at $ 29,800 with a 1% profit in the last 24 hours.