Lael Brainard of the Federal Reserve Calls for Immediate Action to Regulate Cryptocurrencies

The Cryptocurrency Industry requires strong regulation before it becomes so pervasive that it threatens financial stability, said Federal Reserve vice-chair Lael Brainard on Friday, noting that recent turmoil in the space has demonstrated that cryptocurrencies face the same risks as traditional finance.

"It is important that the foundations for sound regulation of the crypto-financial system be established now before the crypto ecosystem becomes so large or interconnected that it might pose risks to the stability of the broader financial system," Brainard said in prepared remarks to a Bank of England conference in London.
With the crypto market crashing and the collapse of major "stablecoin" TerraUSD, the risks of loosely regulated cryptocurrencies and stablecoins operating in a legal grey area have come to light. Over the last seven months, the leading cryptocurrency bitcoin has dropped more than 75% from its all-time high.

According to media reports, the crash has brought down a number of major cryptocurrency companies, including Celsius Network, which has suspended customer withdrawals and may be looking to restructure. Meanwhile, both Toronto-listed Voyager Digital and Singapore-based crypto hedge fund Three Arrows Capital declared bankruptcy this month.