Krypto should be regulated with existing law, says the former FDIC boss

The collapse of the FTX cryptocurrency exchange shows that the US supervisory authorities have to bundle their strength and use existing powers to protect investors instead of waiting for new laws, Sheila Bair, who was at the top of the regulatory response to the financial crisis of 2008.

"The regulatory authorities have to swallow hard and reach an agreement and then start implementation by using the authorities they now have," said Bair, former head of the Federal Deposit Insurance Corporation, to Financial Times.

"Set a frame, announce it publicly, implement it through changes in the rules and guidelines. But continue because more and more people are being injured."

The federal regulation of cryptocurrency products and trading was blocked by claims that they fall between the responsibilities of the Securities and Exchange Commission, Commodity Futures Trading Commission and banking supervision. When Senators asked the US supervisory authorities this week who had monitored FTX, which was once worth $ 32 billion, there was an unpleasant break.

There is also a violent debate about whether authorities should issue a cryptofocussed regulation, with some legislators and industry experts demand more orientation, while market regulators argue that the existing laws are sufficiently clear.

Most Americans who are attracted by Bitcoin and other digital tokens acted through companies that have their headquarters outside the USA, including FTX. This company filed for bankruptcy last week and plunged the digital assets market into a crisis. The group's new chairman of the board said in a court act that FTX had "a complete failure of corporate controls" and subject to "incorrect official supervision abroad".

"That doesn't surprise me and makes me sad," said Bair. "It was a mistake when the working group of the President [on Digital Assets] said we need laws and we throw a hot potato back to the congress."

Some opponents of regulating cryptocurrencies fear that the state supervision of digital assets would give undeserved credibility. Bair said that because of her experience with consumer loans, she decidedly disagreed. "I really don't like payday loans, but.

BAIR said that you do not expect the collapse of crypto prices to lead to broader financial instability. "To date, most cryptos have never had any real applications in the real world, so the economy does not rely on how we rely on our regulated financial system."

But she was worried that the problems with FTX will affect and affect fintechs, trying to use the same type of distributed Ledger technology. She is an external board member of Paxos who offers brokerage and handling services for cryptocurrencies and is regulated by the state of New York.

"I don't want to release the child with the bathing. I hope that this will actually lead to capital to be redistributed by speculative things that really try to use this technology sensibly for something valuable.

"A regulatory imprimature for you would absolutely help. Switch off these other types."