U.S. Federal Reserve Governor Christopher Waller has warned that crypto-currency prices could crash to zero at some point. “Don’t be surprised and don’t expect taxpayers to socialize your losses” when that happens, the Fed governor stressed.
Crypto-currency prices could fall to zero, Fed official warns
Federal Reserve Governor Christopher J. Waller warned against the danger of investing in crypto-currencies on Thursday at the Global Interdependence Center conference on “digital currency, decentralized finance and the crypto-currency puzzle.“
“To me, a crypto asset is nothing more than a speculative asset, like a baseball card. If people believe that other people will buy it from them in the future at a positive price, then it will trade at a positive price today.“, he described. “Otherwise, its price will go to zero“.
He added: “If people want to hold an asset like that, then go ahead. I wouldn’t, but I don’t collect baseball cards either“. However, the Fed governor cautioned:
If you buy crypto-assets and the price falls to zero at some point, don’t be surprised and don’t expect taxpayers to socialize your losses.
“Several major crypto-related companies have filed for bankruptcy, including payment platforms, exchanges, crypto lenders and hedge funds“, noted Christopher J. Waller, adding that retail and institutional investors have suffered from the crypto’winter.
The Fed governor went on to express concerns about banks and other financial intermediaries engaging in crypto-currency activities.”which present an increased risk of fraud and scams, legal uncertainties, and the prevalence of inaccurate and misleading financial disclosures“. It stressed that banks considering engaging in crypto-currency activities must meet the requirements of “Know your customer” and “fight against money laundering“.
Christopher J. Waller added:
So far, the fallout from the strains in the cryptocurrency sector on other parts of the financial system has been minimal.
The Fed official is also skeptical of central bank digital currencies (CBDCs). Last October, he said that he was “not a big fan“of the Fed’s issuance of the digital dollar, but that he was open to having someone convince him that “it’s something that really has value.“