By Barani Krishnan
Investing.com — U.S. regulators’ rhetoric against cryptocurrencies reached new heights Friday when Federal Reserve Governor Christopher Waller warned that digital coins could lose all their value someday and buyers shouldn’t expect to be bailed out.
“If you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect taxpayers to socialize your losses,” Waller said in a forceful speech aimed at enlightening Americans over the unknown risks in digital coins and the oft-abuse of investors by funds and entrepreneurs in the space.
The price of , the most popular cryptocurrency, was down more than 4% on the day, hovering at $12,700, after Waller spoke.
Bitcoin sank to a two-year low of around $15,500 in November as U.S. regulators, including the Securities and Exchange Commission that oversees the stock exchange, came down hard on the crypto industry after the collapse of FTX, an exchange that facilitates trade in digital coins.
Prosecutors have charged FTX founder Sam Bankman-Fried with stealing billions of dollars in customer funds to plug losses at his hedge fund, Alameda Research, which acted as a backstop financier for the exchange. Bankman-Fried has denied any criminal wrongdoing.
The FTX saga initially wiped out some $1.3 trillion from digital coins, although Bitcoin rebounded 40% in January from November’s lows. “It’s clear … that the crypto faithful are keeping the faith,” the New York Times said in a commentary in January.
The FTX collapse also led to bankruptcy filings by other branded names in the crypto space such as the Celsius Network and the lending unit of Genesis Global Capital.
Besides Bankman-Fried, other individuals have faced charges too. Just on Tuesday, a former product manager at another crypto exchange, Coinbase (NASDAQ:), pleaded guilty to insider trading using confidential information on which assets were scheduled to be listed on the exchange, the Justice Department said.
Waller said while the impact of “crypto industry stress” on the financial system has been minimal, it was critical to mitigate the fiscal stability risks associated with them.
He added that banks that deal with crypto customers must comply with “know-your-customer” and anti-money-laundering regulations.
Financial regulators, including those in New York state, have also issued multiple guidance to crypto investors and operators in recent months to prevent more debacles within the industry.
