Federal Reserve Governor Says Crypto Activities ‘Raise a Number of Significant Issues’
Federal Reserve Governor Michelle W. Bowman has acknowledged that despite the growth of cryptocurrencies, they are a problem area, especially in relation to the banking sector.
According to Bowell, cryptocurrencies raise several issues and the regulatory outlook should be clear to accommodate the new technology, she said during a session with the Institute of International Finance (IIF) on September 30.
However, the governor emphasized that the rapidly evolving technology around cryptocurrencies can make it challenging to implement some rules. For example, Bowell noted that the challenges arise if players in the financial sector lack experience with regulations to accommodate crypto-assets alongside the ambiguity of the laws.
“Another area where regulation and oversight continues to evolve is around banks that engage in crypto-asset activities. These activities raise a number of important issues. When I think about the evolution of oversight and regulation of these activities, I ask myself whether the rules are clear in the current rapidly evolving environment and whether the rules as they evolve serve a legitimate regulatory purpose, Bowell said.
Regulatory concerns
During the session, Bowell noted that banks can engage in crypto-related activities but should first understand supervisory expectations. However, she called for more dialogue to find the right regulatory outlook. According to Bowell:
“The adoption and use of new technologies may present new supervisory concerns, but the best way to address these concerns and encourage innovation is a dialogue between bankers and regulators before and during the development and implementation of these technologies.”
Furthermore, the official emphasized that the banks must have a clear regulatory framework that can match the risk associated with the cryptocurrency sector’s price volatility.
She pointed out that one consideration to look for is finding ways to incorporate crypto into banking or push digital assets outside of banking.
SEC’s criticism of crypto regulations
In this line, it is worth noting that the United States Security Exchange Commission (SEC) has previously been criticized for not providing clear guidance in the regulation of cryptocurrencies, especially when it comes to the classification of goods and securities.
Critics of the SEC argue that the agency implements crypto oversight against various entities, but no specific laws exist targeting digital currencies. Along these lines, the agency has faced criticism over alleged plans to stifle the growth of cryptocurrencies.
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