Fed Governor Waller: “Crypto frenzy is cooling”... Traditional finance risk recalibration

Christopher Waller, a member of the Board of Governors of the U.S. Federal Reserve (Fed), recently assessed that in connection with volatility in the crypto-asset (cryptocurrency) market, “as links with traditional finance have strengthened, previously overheated expectations are gradually cooling.”

According to Cointelegraph, a crypto-focused outlet, Waller said at a conference held the previous day, “Some of the optimism that flowed into the crypto market after the current administration took office is fading,” adding, “As crypto has been incorporated into mainstream finance, an associated adjustment was inevitable.”

He cited inflows of funds from traditional financial institutions and the recalibration of risk management as drivers behind the recent correction. Waller explained, “Firms that came in from mainstream finance had to rebalance their risk positions, and selling pressure emerged in that process.” He also pointed to delays in Congress over legislation on the market structure for crypto assets as a factor increasing uncertainty.

On the sharp price decline, he cautioned against overinterpretation. Waller said, “Volatility in crypto assets is ‘part of the game’,” adding, “Being able to make money or lose money is the nature of this market.” He continued, “Prices go up and they go down. If you don’t like that feature, it’s better not to participate.”

Meanwhile, regarding the so-called “payment accounts” initiative the Fed is pursuing, Waller said it is “aimed at being introduced within this year.” The accounts are a plan to grant limited central bank access to fintech and crypto firms, and are expected to include restrictions on interest payments and caps on balances. He explained, “This framework is designed to support innovation while maintaining the stability of the payment system.”