Sheila Bair, a former chairperson of the Federal Deposit Insurance Corporation (FDIC), believes the U.S. should create a wholly new regulatory framework for cryptocurrencies.
Speaking at CB Insights’ Future of Fintech conference on Thursday, the noted Fedcoin supporter – that is, a cryptocurrency operated by the U.S. central bank – addressed the challenges that regulators face when applying existing financial regulations to the nascent crypto space.
Bair adding that “regulators get a bad rep on this … [but] money transfer law is weird.”
She went on to explain:
“We are trying to jam [cryptocurrencies] into state money transaction laws, it just doesn’t work. I think at some point, we will need a federal framework to have some type of regulatory oversight of exchanges established to trade crypto assets. They may also be securities, if there is an [initial coin offering] being used to raise equity, they need to regulate it.”
Bair declared that she “welcome[s] regulation” of the cryptocurrency space, advocating for action that takes place sooner than later.
Indeed, the former head of the U.S. government corporation that backs up bank deposits said that the private sector may force financial institutions to adopt private currencies – including cryptocurrencies – because “everybody hates bank account fees, the retailers hate interchange fees.”
“If there is a way to get around that, I think you can see a shift [fairly] quickly,” she said, adding:
“I do think the Fed needs to get ahead of this.”
Bair reiterated her support for a FedCoin, noting that a central bank-issued cryptocurrency would solve transitional issues existing in current monetary policies issues while allowing the Federal Reserve maintain its ability to control the U.S.’ money supply.
As an example, she pointed out that a bank which receives a 1.95 percent interest rate with the Fed tried to offer a 0.01 percent rate to individuals opening a savings account.
Sheila Bair image via CB Insights