Benzinga - Federal Reserve Gov. Christopher Waller on Friday warned taxpayers in the U.S. to not expect any sympathy from the government should the prices of cryptocurrencies they invest in end up crashing.
What Happened: Waller also emphasized the need for banks to be fully aware of the customers' business models, risk management systems and corporate governance structures in order to avoid any potential losses in the event of a crypto meltdown.
“If people want to hold such an asset, then go for it. I wouldn't do it, but I don't collect baseball cards, either. However, if you buy crypto-assets and the price goes to zero at some point, please don't be surprised and don't expect taxpayers to socialize your losses,” he said at the Global Interdependence Center event in California.
Waller added that he was concerned about banks engaging in activities that present a heightened risk of fraud and scams, legal uncertainties, and the prevalence of inaccurate and misleading financial disclosures.
“As with any customer in any industry, a bank engaging with crypto customers would have to be very clear about the customers' business models, risk-management systems, and corporate governance structures to ensure that the bank is not left holding the bag if there is a crypto meltdown,” he said.
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Why It Matters: The governor added that banks considering engaging in crypto-asset-related activities face a critical task to meet the "know your customer" and "anti-money laundering" requirements, which they in no way are allowed to ignore.
“So far, spillovers to other parts of the financial system from the stress in the crypto industry have been minimal. The lack of spillovers to date may be attributable in part to the relatively limited number of interconnections between the crypto ecosystem and the banking system,” he said.
He further noted that it was critical to ensure the financial stability risks associated with crypto-assets are mitigated.
“It is important that we keep the various parts of the crypto ecosystem distinct in our minds as the debate about if and how to regulate crypto rolls on. Doing so will ensure we do not unduly limit the development and potential future uses of the positive features of the crypto ecosystem,” Waller said.
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