Fed flags crypto risks in January meeting minutes

Some participants in the Federal Open Market Committee noted rising risks to financial stability linked to the popularisation of crypto assets and DeFi platforms. This is stated in the minutes of the meeting on January 25-26.

The last time the monetary authorities drew attention to digital assets was at the July 2021 meeting.

In the financial stability section, members noted elevated valuations of financial assets, a sharp rise in real estate prices, and the crypto market’s high capitalization, as well as its substantial volatility.

Among the identified potential threats is the rise in the market value of stablecoins. The Fed sees in this a possibility of a banking panic among token holders and risks associated with the potential role of ‘stablecoins’ as a means of payment.

The Fed published a report, in which threats and the impact of stablecoins on monetary policy and the U.S. credit system are discussed.

In February, the House Committee on Financial Services did not support the idea of the PWG to classify the issuers of ‘stablecoins’ as insured depository institutions.

Earlier, Glassnode analysts recorded a reduction in risk for Bitcoin investors ahead of the Fed meeting.

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