Fed Governor Warns Crypto Prices Could Fall to Zero – Says ‘Don’t Expect Taxpayers to Socialize Your Losses’

Federal Reserve Governor Christopher J. Waller warned Thursday about the dangers of investing in cryptocurrency at the Global Interdependence Center Conference ‘digital currency, decentralized finance and the puzzle that is crypto.’

A crypto asset to me is nothing but a speculative asset. It’s like a baseball card. He explained that if people believe others will purchase it in the future, it will trade today at a positive value. Its price will drop to zero if it is not.

He said, “If people want such an asset to keep, then go for them.” It would be a mistake, but I also don’t like collecting baseball cards. The Fed governor warned however:

Do not be surprised if crypto assets drop in price. Don’t expect the government to pay for your losses.

Waller stated that ‘a number of prominent crypto-related companies have filed for bankruptcy, including payments platforms, exchanges and crypto lenders, as well as hedge funds and crypto lenders’. He also noted that institutional and retail investors have both suffered from the crypto winter.

Fed Governor voiced concerns about banks and financial intermediaries engaging with crypto activities. He stated that there was a higher risk of fraud, scams, legal uncertainty, and the existence of misleading and inaccurate financial disclosures. He stated that crypto activity by banks must be regulated under the ‘know your client’ and anti-money laundering’ rules.

Waller said:

The impact of stress in crypto-related industries on other financial systems has been minimal.

A Fed official is also skeptical about central bank digital currencies. He stated that although he doesn’t like the Fed issuing digital dollars, he’s open to hearing from someone who does.