FRB Governor Waller Calls for Crypto-Asset Regulation to "Protect the Rest of Us"

In a speech before a financial innovation conference sponsored by the Swiss National Bank and the Center for Innovative Finance of the University of Basel, Federal Reserve Board ("FRB") Governor Christopher J. Waller argued that the regulatory focus of crypto and decentralized markets should be on those investors who may experience catastrophic losses due to their lack of understanding of the risks involved.

Mr. Waller stated that "the main issue in crypto-asset regulation isn't how to protect sophisticated crypto-investors; it's how to protect the rest of us." He referenced history and current research to assert that retail crypto investors do not understand how to buy, hold or trade digital assets. He explained that people may invest in crypto markets because of the low cost of entry and do not realize the real potential for high volatility, fraud and theft. He expressed this concern in the context of rapid crypto market expansion over the past five years and media broadcasting huge potential windfalls. He predicted that, eventually, demands will be made to make devastated investors "whole" by socializing their individual losses. He recommended putting in place investor protections now to mitigate that likely risk.