Fed’s Waller Says Crypto Is Risky, Harker Sees Still Demand

Feb 10 (Reuters) – Federal Reserve Governor Christopher Waller had a pair of warnings to those involved in cryptocurrency assets on Friday, telling buyers they could lose their investments and banks to protect themselves from bad actors and risks for the financial system.

At the same conference several hours later, Philadelphia Fed President Patrick Harker presented survey data suggesting that despite these risks, cryptocurrency is likely to remain in demand.

In recent months, the cryptocurrency industry has been plagued by massive investor losses, bankruptcies of crypto exchanges, lenders and payment platforms, and high-profile lawsuits including a criminal case against FTX founder Sam Bankman-Fried. US regulators including the US Federal Reserve have told banks to be more careful about fraud risks.

In remarks to a Global Interdependence Center conference, Waller said so far the spillover effect to the broader financial system has been “minimal,” and it is critical that regulators ensure they mitigate financial stability risks associated with stress in the crypto industry.

At the same time, he said, banks considering involvement in cryptocurrency must meet “know your customer” and anti-money laundering requirements, and they must ensure they monitor their customers’ business models and risk management systems so that the bank “is not left on the table.” the bag” if it’s a crypto meltdown

Waller had an even stronger warning for cryptocurrency traders: as assets that have no intrinsic value, cryptocurrencies are risky.

“If people want to hold an asset like that, then go for it,” Waller said. “But if you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect the taxpayers to socialize your losses.”

Still, according to data Harker presented from a survey conducted in October, at least some Americans remain sold on the idea. Crypto buyers remain predominantly male, more often younger and wealthier than the average American, and with black and Hispanic consumers disproportionately represented, the survey showed.

“The strength of investment and experimentation as reasons for market participation has remained stable, and the socioeconomic groups most likely to acquire cryptocurrencies have not changed significantly,” Harker said. “These patterns seem to suggest that cryptocurrencies will remain in demand by certain consumers despite the recent crypto winter.”

Still, only 40% of crypto owners polled in October said they planned to buy more — down from more than half in a similar survey last January, Harker said.

Reporting by Ann Saphir; Editing by Paul Simao and Andrea Ricci

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