Fed Governor Says Crypto Buyers Wont Be Bailed Out If Price Goes To Zero

WASHINGTON (UrduPoint News / Sputnik - 11th February, 2023) Digital coins could lose all their value someday and buyers shouldn't expect to be bailed out, Federal Reserve Governor Christopher Waller said on Friday.

"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," Waller said in a speech.

The price of Bitcoin, the most popular cryptocurrency, was down more than 4% on the day, hovering at $12,700 after Waller spoke.

Bitcoin hit a two-year low of around $15,500 in November as US financial authorities, including the Securities and Exchange Commission, which regulates the country's stock exchange, came down hard on the industry after the collapse of FTX, an exchange that facilitates trade in crypto assets.

Prosecutors in Manhattan have accused FTX founder Sam Bankman-Fried of stealing billions of Dollars in customer funds to plug losses at his hedge fund, Alameda Research, which acted as a backstop financier for the exchange. Bankman-Fried has denied any criminal wrongdoing.

The FTX saga initially wiped out some $1.3 trillion from digital tokens, although Bitcoin itself saw a 40% rebound in January from November's lows.

"It's clear ... that the crypto faithful are keeping the faith" the New York Times said in a commentary in January.

The FTX collapse also led to bankruptcy filings by other branded Names in crypto such as the Celsius Network and the lending unit of Genesis Global Capital.

Besides Bankman-Fried, other individuals have faced charges too. Just this week, a former product manager at another crypto exchange, Coinbase, pleaded guilty to insider trading using confidential information on which assets were scheduled to be listed on the exchange, the Justice Department said.

Waller said while the impact of "crypto industry stress" on the financial system has been minimal, it is critical to mitigate the fiscal stability risks associated with them.

He added that banks that deal with crypto customers must comply with know-your-customer and anti-money-laundering regulations.

Financial regulators, including those in New York State, have issued multiple guidance to crypto investors and operators in recent months to prevent more debacles within the industry.