Fed’s top financial regulator urges ‘guardrails’ for crypto

Nov 14, 2022, 4:33 PM | Updated: Nov 15, 2022, 5:24 am
FILE - Federal Reserve Board Vice Chair for Supervision Michael Barr listens to participants in a c...

FILE - Federal Reserve Board Vice Chair for Supervision Michael Barr listens to participants in a conversation with leaders from organizations that include nonprofits, small businesses, manufacturing, supply chain management, the hospitality industry, and the housing and education sectors at the Federal Reserve building, Friday, Sept. 23, 2022, in Washington. In prepared testimony released Monday, Nov. 14, 2022, Barr is urging Congress to pass legislation that would impose regulation on crypto currencies in the wake of the swift collapse a week earlier of FTX, a leading crypto exchange. (AP Photo/Manuel Balce Ceneta, File)

(AP Photo/Manuel Balce Ceneta, File)

WASHINGTON (AP) — The top U.S. banking regulator at the Federal Reserve is urging Congress to pass legislation that would impose regulation on crypto currencies in the wake of the swift collapse last week of FTX, a leading crypto exchange.

Michael Barr, the Fed’s vice chair for supervision, said in prepared testimony released Monday that “recent events in crypto … have highlighted the risks to investors and consumers associated with new and novel asset classes and activities when not accompanied by strong guardrails.”

Barr, who took office in July, is scheduled to testify before Congress Tuesday for the first time as vice chair. He did not refer specifically to FTX in his written remarks.

Yet his appearance comes after FTX, the third-largest crypto currency exchange, formerly led by Sam Bankman-Fried, filed for bankruptcy Friday. The fall of FTX has rippled throughout the crypto world, with lender BlockFi pausing customer withdrawals.

Barr said “some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks.” Those include runs on deposits, collapsing asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering, he said.

“These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said.

The collapse of FTX occurred outside the banking system, Barr noted, a focus of his oversight.

“But recent events remind us of the potential for systemic risk if interlinkages develop between the crypto system that exists today and the traditional financial system,” he said.

Regarding the banking system overall, most large banks have healthy levels of cash reserves, Barr said, beyond even what is required by regulation.

But with the economy slowing as the Fed rapidly lifts interest rates, banks may come under more stress, he said.

The “economic outlook has weakened,” increasing uncertainty, Barr said. “A weaker economy could put stress on households and businesses and, thus, on the banking system as a whole.”

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Associated Press

Water boil order issued for more than 2 million in Houston

HOUSTON (AP) — More than 2 million people in the Houston area were under a boil order notice Monday after a power outage caused low pressure at a water purification plant, officials said. The order — which means water must be boiled before it’s used for cooking, bathing or drinking — also prompted schools in […]
7 hours ago
Associated Press

Mother charged with murder in stabbings of her 2 boys in NYC

NEW YORK (AP) — A mother has been charged with murder in the stabbings of two small children in a Bronx apartment, police said Monday. Dimone Fleming, 22, is accused of killing 11-month-old Octavius Fleming-Canada and 3-year-old Dashawn Fleming, who were found with multiple stab wounds on Saturday in the apartment in the Mount Hope […]
7 hours ago
FILE - This Oct. 3, 2016, photo, provided by the Martin County Sheriff's Office, shows Austin Harro...
Associated Press

Judge to decide fate of man accused in face-biting attack

FORT LAUDERDALE, Fla. (AP) — A trial for a former college student who randomly killed a Florida couple in their garage six years ago and then chewed on one victim’s face was set to begin Monday. Circuit Judge Sherwood Bauer will decide whether Austin Harrouff, 25, goes to prison for the rest of his life, […]
7 hours ago
FILE- Russia's Sudzha gas pumping station is seen, Sunday, Jan. 11, 2009. Russian energy giant Gazp...
Associated Press

Russian energy giant says no further gas cuts to Moldova

BUCHAREST, Romania (AP) — Russian energy giant Gazprom announced Monday that it will not further reduce natural gas to Moldova as it had threatened to do after claiming that bills went unpaid and that flows crossing through Ukraine were not making it to Moldova. Gazprom tweeted that Moldovagaz has “eliminated the violation of payment” for […]
7 hours ago
This image provided by the USGS Hawaiian Volcano Observatory shows a view from a research camera on...
Associated Press

Hawaii’s Mauna Loa starts to erupt, sending ash nearby

HONOLULU (AP) — Hawaii’s Mauna Loa, the world’s largest active volcano, has started to erupt for the first time in nearly four decades, prompting volcanic ash and debris to fall nearby, authorities said Monday. The eruption began late Sunday night in the summit caldera of the volcano on the Big Island, the U.S. Geological Survey […]
7 hours ago
FILE - This image provided by the National Institute of Allergy and Infectious Diseases (NIAID) sho...
Associated Press

WHO renames monkeypox as mpox, citing racism concerns

LONDON (AP) — The World Health Organization has renamed monkeypox as mpox, citing concerns the original name of the decades-old animal disease could be construed as discriminatory and racist. The U.N. health agency said in a statement Monday that mpox was its new preferred name for monkeypox, saying that both monkeypox and mpox would be […]
7 hours ago

Sponsored Articles

...
Quantum Fiber

How high-speed fiber internet can improve everyday life

Quantum Fiber supplies unlimited data with speeds up to 940 mbps, enough to share 4K videos with coworkers 20 times faster than a cable.
...
SCHWARTZ LASER EYE CENTER

Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.
...
Day & Night Air Conditioning, Heating and Plumbing

Ways to prevent clogged drains and what to do if you’re too late

While there are a variety of ways to prevent clogged drains, it's equally as important to know what to do when you're already too late.
Fed’s top financial regulator urges ‘guardrails’ for crypto