The Fed Warned About Crypto For The First Time In Its Financial Risk Review | Currency News | Financial and business news
The Federal Reserve warned about cryptocurrencies and their price volatility for the first time in its monetary policy report released on Friday.
“Soaring prices for a variety of crypto assets also partly reflect an increased appetite for risk,” the report, written by the board of governors, said.
The only sentence in the 75-page semi-annual report was inserted in the middle of a discussion of risky assets, which the central bank says typically rose in the first half of 2021.
Investors’ appetite for risk has been supported by the accelerating pace of economic reopening, stock indexes hitting record highs, price-to-earnings ratio remaining high and yields on corporate bonds and loans Leverage remaining low, among others, according to the report. .
Nonetheless, the central bank said it was confident the markets would withstand future headwinds.
“While some financial vulnerabilities have increased since February, the institutions at the heart of the financial system remain resilient,” added the report, intended for presentation to the US Congress.
Like many central banks around the world, the Fed is still looking for the most sustainable and efficient ways to approach the rapidly evolving $ 2,000 billion cryptocurrency space.
Fed Chairman Jerome Powell met with Brian Armstrong, the CEO of Coinbase, on May 11, as well as crypto-backer Christopher Giancarlo the next day, according to an entry in his monthly calendar.
Powell also revealed on May 20 that the Fed has taken further steps in its exploration of a digital currency and will release a discussion paper this summer outlining its current thinking on digital payments.
Cryptocurrencies, after hitting record highs at the start of the year and experiencing a massive crash in May, have traded sideways in recent weeks.
The biggest and most popular cryptocurrencies are still on the rise for the year. Bitcoin and Ether have increased by 250% and 777% respectively over the past 12 months.