Fed News: The Federal Reserve (FED), in its overall assessment of the stability of the financial system, cited for the first time an increase in crypto-asset prices, saying that the increase led to increased risk for investors.
The brief comment from the Fed’s semi-annual Congressional Monetary Policy Report released on Friday could be considered the latest sign that policymakers are paying more attention to cryptoassets, which used to be a small part of the financial system.
According to the central bank’s monthly report, Fed Chairman Jerome Powell announced on May 11 that cryptocurrency exchange Coinbase Global Inc. met with its president and crypto advocate Christopher Giancarlo a day later.
Powell’s face-to-face meeting with Brian Armstrong, Coinbase CEO, and Paul Ryan, the former Speaker of the U.S. House of Representatives, lasted 30 minutes, and a week of intense volatility fell that day for cryptocurrencies, including Bitcoin. Both Fed and Coinbase spokespersons did not comment on what was said.
Bitcoin price has increased by about 250% compared to a year ago, even though it is well below its April high.
Powell has previously said he wants the Fed to play a “leading role” in developing international standards for cryptocurrency. The central bank plans to release a discussion paper highlighting the risks and benefits of digital payments this summer.
In its Monetary Policy Report, the Fed said that since the last account it presented to Congress in February, parts of the financial system have become more vulnerable to potential instability, but the core of the system has remained resilient.
He described stock and commercial real estate prices as high and said spreads on corporate bonds and leveraged loans remained low.
“The rise in the prices of various crypto-assets partially reflects the increased risk appetite,” he added.
The central bank also issued a warning about the general level of asset prices.
“Asset prices may be vulnerable to significant declines if investor risk appetite declines, interest rates rise unexpectedly, or recovery stalls,” the report said.