Don’t be surprised if the price goes to zero by Investing.com

By Barani Krishnan

Investing.com — U.S. regulators’ rhetoric against cryptocurrencies reached new heights on Friday as Federal Reserve Governor Christopher Waller warned that digital coins could lose all value one day and buyers should not expect to be bailed out.

“If you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect the taxpayers to socialize your losses,” Waller said in a powerful speech aimed at educating Americans about the unknown risks in digital coins and often abuse by investors of funds and entrepreneurs in space.

The price of , the most popular cryptocurrency, fell more than 4% on the day, hovering at $21,700, after Waller spoke.

Bitcoin sank to a two-year low of around $15,500 in November as US regulators, including the Securities and Exchange Commission that oversees the exchange, came down hard on the crypto industry following the collapse of FTX, an exchange that facilitates trading of digital coins.

Prosecutors have charged FTX founder Sam Bankman-Fried with stealing billions of dollars in client funds to cover losses at his hedge fund, Alameda Research, which acted as a backstop financier for the exchange. Bankman-Fried has denied any criminal offences.

The FTX saga initially wiped out about $1.3 trillion from digital coins, although Bitcoin rebounded 40% in January from November’s lows. “It’s clear … that crypto faithful are keeping the faith,” the New York Times said in an op-ed in January.

The FTX collapse also led to bankruptcy filings by other brand names in the crypto space such as Celsius Network and the lending unit of Genesis Global Capital.

In addition to Bankman-Fried, other people have also been charged. Just on Tuesday, a former chief product officer at another crypto exchange, Coinbase (NASDAQ: ), pleaded guilty to insider trading by using confidential information about which assets were scheduled to be listed on the exchange, the Justice Department said.

Waller said that while the impact of “crypto industry stress” on the financial system has been minimal, it was critical to reduce the fiscal stability risks associated with them.

He added that banks dealing with crypto customers must comply with “know-your-customer” and anti-money laundering regulations.

Financial regulators, including those in New York state, have also issued more guidance to crypto investors and operators in recent months to prevent more debacles in the industry.