Earlier this year, President Joe Biden announced an executive order on cryptocurrencies that attempted to fix the lack of a framework for crypto development in the U.S.
Brainard on Friday pointed to the high volatility of cryptocurrencies. She also talked about recent events that pressured crypto prices such as the dramatic collapse of Terra, as well as attempts to create decentralized stablecoins and the current liquidity crisis involving Three Arrows Capital.
“New technology and financial engineering cannot by themselves convert risky assets into safe ones,” Brainard said.
“Despite significant investor losses, the crypto financial system does not yet appear to be so large or so interconnected with the traditional financial system as to pose a systemic risk,” she added. “This is the right time to establish which crypto activities are permissible for regulated entities and under what constraints so that spillovers to the core financial system remain well contained.”
