Former President of the FED: When is the regulation of cryptocurrencies?

FED Crypto Regulation
  • With the lack of regulation for cryptocurrencies in the last decade, tension has been created in the market.
  • Development has been excruciatingly slow given a lack of awareness and a complex regulatory structure that divides authority between the Federal Reserve, the Treasury Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission and others.
  • Dudley insists that in order to begin to provide a breakthrough in this situation, the government should focus on hiring expert advisors on the subject, and thus form groups of experts in the crypto industry.

With the lack of regulation for cryptocurrencies in the last decade, tension has been created in the market. Cryptocurrencies such as Bitcoin and Ethereum are increasing in popularity every day, making them accepted as an alternative to replace more conventional assets.

Bill Dudley, an American economist who served as the president of the New York Fed from 2009 to 2019, raised his concerns about the non-regulation of crypto in an op-ed on Bloomberg. He mentions that the longer this situation continues, there will be worse the regulatory crackdown that would increase the risks for investors and the economy.

According to Dudley, blockchain and crypto technologies have certain drawbacks, but they also offer some potential advantages:

“It could create a better identity and privacy system. It could help track and verify ownership of goods sold internationally. It could vastly improve payments, making them available 24/7 to more people and at a lower cost, particularly for the smaller, more frequent transactions that migrant workers undertake.”

“A desirable future for digital finance requires prudent regulation,” Dudley argued. The first and very important action was the executive order made by the President of the United States, Joe Biden, in which he managed to maintain the correct tone on this matter. Although this has been criticized, not enough has been done to ensure that the measures are used before uncontrolled growth is generated that can cause significant interruptions and losses.

What is causing the wait?

Development has been excruciatingly slow given a lack of awareness and a complex regulatory structure that divides authority between the Federal Reserve, the Treasury Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission and others.

Dudley insists that in order to begin to provide a breakthrough in this situation, the government should focus on hiring expert advisors on the subject, and thus form groups of experts in the crypto industry.

Furthermore, he argued that authorities should use “an iterative approach, emphasizing more their goals, instead of focusing on how to combat money laundering and safeguard consumers and investors, the focus should be on how to achieve those goals. Set a clear goal and let the participants figure out how best to achieve it in practice.”

Lastly, Dudley said, “The longer officials wait, the greater the risks to consumers, markets and the economy, and the greater the chance that large losses due to cyber theft or crypto asset market crashes will force to crack down on innovation. Therefore, it is in everyone’s best interest that the process begins now.”

It can be seen how many governments are in the process of beginning the regulation of cryptocurrencies, just as others want to ban them completely. China, which in December expanded its anti-crypto campaign to include short crypto-related movies uploaded to social media.