Fed Governor Calls Out Crypto Market 'Volatility'

Lael Brainard, a governor at the U.S. Federal Reserve, has said bitcoin and its peers raise investor protection and money laundering concerns.

AccessTimeIconApr 4, 2018 at 2:30 p.m. UTC
Updated Sep 13, 2021 at 7:47 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

A member of the Federal Reserve's board of governors called bitcoin and other cryptocurrencies out for their "extreme volatility" on Tuesday, but made it clear that the new asset class does not pose a threat to the stability of the U.S. economy.

Lael Brainard, who also sits on the central bank's powerful interest rate-setting committee, told an audience in New York City:

"One area that the Federal Reserve is monitoring is the extreme volatility evidenced by some cryptocurrencies. For instance, bitcoin rose over 1,000 percent in 2017 and has fallen sharply in recent months."

She said that cryptocurrency markets "may raise important investor and consumer protection issues, and some appear especially vulnerable to money-laundering ... concerns." Brainard further cautioned individual investors to be aware of the "possible pitfalls of these investments and the potential for losses."

On the other hand, Brainard argued that cryptocurrencies were unlikely to "pose a threat to financial stability," given that the assets are not commonly used in payments and there is little evidence that investors have borrowed large amounts of money to invest in them.

CoinDesk's State of the Blockchain 2018 report found that only 19 percent of survey respondents had borrowed funds to buy cryptocurrencies and, of those who did, more than half had already repaid that debt.

The central banker also indicated that the Fed would pay closer attention to cryptocurrencies in the future, saying:

"Our assessment of these markets is limited by their opacity. Nonetheless, we will continue to study them."

Elsewhere, Brainard devoted the bulk of her remarks to traditional asset classes such as stocks and bonds, where she said prices may be "particularly susceptible to an unexpected development" such as accelerating inflation. Still, she characterized overall risks to financial stability as "moderate," due to financial reforms introduced after the 2008 crisis.

Lael Brainard image via Shutterstock


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.