US regulators' rhetoric against cryptocurrencies reached new heights on Friday when Federal Reserve Governor Christopher Waller warned that cryptocurrencies could one day lose all their value and buyers should not expect anyone to bail them out.
Waller said in a powerful speech aimed at educating Americans about the unknown risks in cryptocurrencies and the often abuse of investors by funds and entrepreneurs in the cryptocurrency world.
Bitcoin price
Bitcoin price fell more than 4% during the day on Friday, hovering at $21,700 after Waller spoke out.
Bitcoin fell to a two-year low of around $15,500 in November, as US regulators including the Securities and Exchange Commission aggressively attacked the market after the scandal-stricken crash of FTX, an exchange facilitating trade in cryptocurrencies.
Prosecutors have charged FTX founder Sam Bankman Fried with stealing billions of dollars of client funds to plug losses at his hedge fund, Alameda Research, which acted as a financier backing the exchange. Bankman-Fried has denied any criminal wrongdoing.
The FTX saga initially caused a loss of about $1.3 trillion in cryptocurrency, though Bitcoin rebounded 40% in January from its November lows. “Clearly… cryptocurrency believers keep the faith,” the New York Times said in a January commentary.
The collapse of FTX also led to the bankruptcy of other well-known names in the cryptocurrency world such as Celsius Network and the lending unit of Genesys.
Besides Bankman-Fried, other individuals have also faced charges. Just on Tuesday, the DOJ said, a former product manager at another crypto exchange, Coinbase, pleaded guilty to insider trading using classified information about assets that were slated to be listed on the exchange. .
Waller said that while the impact of “the cryptocurrency industry’s pressures” on the financial system was minimal, it was necessary to mitigate the associated financial stability risks.
He added that banks dealing with cryptocurrency customers must comply with “know your customer” rules and anti-money laundering regulations.
Financial regulators, including those in New York state, have issued multiple guidelines to crypto investors and operators in recent months to prevent further meltdowns within the industry.