Crypto regulation shouldn’t smother innovation
The risks of digital assets should be kept in mind while various parts of the crypto ecosystem are explored for potential use, Federal Reserve Governor Christopher Waller said at a conference Friday.
Though not a fan of cryptocurrency himself, Waller said digital assets and the technologies that support them should be used to address a wide range of issues faced by financial institutions.
“While it is critical that we ensure that the financial stability risks associated with crypto-assets are mitigated, it is important that we keep the various parts of the crypto ecosystem distinct in our minds as the debate about if and how to regulate crypto rolls on,” Waller said Friday. “Doing so will ensure we do not unduly limit the development and potential future uses of the positive features of the crypto ecosystem.”
Waller highlighted some elements of the digital-asset market that he said would be valuable to traditional banking, such as distributed ledgers, smart contracts, and tokenization as a form of data privacy.
Though some of the technologies are not fully mature, they are moving away from their decentralized origins, he said.
Over time, smart contracts could be used to speed up the clearance and settlement of securities transactions, while tokenization, combined with data vaults to securely store personal information, can be used to protect one’s identity and prevent anonymous trading, he said.
“While these technological developments are still in their infancy, they have potential applications beyond the crypto ecosystem that could lead to substantial productivity enhancements in other industries,” Waller said.
Citing research from 1958, Waller said “economists have known that an intrinsically useless object can trade at a positive price.”
Cryptocurrency is not different, he said, as it has nothing “new or unique, but rather is based on economic relationships that result in objects having value.”
What about you? What are your thoughts on that?
