© Courtesy of BenzingaChristopher Waller , the governor of the Federal Reserve, warned American taxpayers on Friday not to expect sympathy from the government if the prices of the cryptocurrencies they invest in collapse.
What happened: Waller also highlighted the need for banks to fully understand their clients' business models, risk management systems and corporate governance structures to avoid potential losses in the event of a cryptocurrency crash.
“If people want to have assets like that, go for it. I wouldn't, but I don't collect baseball cards either. However, if you buy crypto-assets and their price drops to zero at some point, please don't be surprised and don't expect the taxpayers to touch your losses," he said at a Global Interdependence Center event in California.
Waller added that he is concerned that banks are engaging in activities that create an increased risk of fraud and fraud, legal uncertainty and the dissemination of inaccurate and misleading financial information.
“As with any client in any industry, a bank serving crypto clients needs to be very clear about their clients' business models, risk management systems and corporate governance structures to ensure the bank is not left behind in the event of a crypto crash.
Also Read: South Korea Counters North Korea's Cryptocurrency Threat
Why it matters: The governor added that banks considering engaging in activities related to crypto-assets have an important role to play in meeting KYC and AML requirements, which they are not allowed to do under any circumstances.
So far, the effects of the crypto industry contraction on other parts of the financial system have been minimal. The lack of spillovers so far can be partly explained by the relatively limited number of interconnections between the crypto ecosystem and the banking system. he said
He also stated that it is important to ensure that the financial stability risks associated with crypto-assets are reduced.
"It is important to separate in our minds the different parts of the crypto ecosystem as the debate continues on how crypto should be regulated. This ensures that we do not lose sight of the development and potential future use of the positive features of the cryptocurrency ecosystem.
Read Next: Investment Experts Predict the Next Crypto Bull Market
Photo: SpeedKingz via Shutterstock
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.