The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, says crypto exchange FTX isn’t “one fraudulent company in a serious industry.” Stating that the “Entire notion of crypto is nonsense,” the Fed president claimed it is “just a tool of speculation and greater fools.”
Minneapolis Fed President Neel Kashkari on Crypto and FTX Collapse
Federal Reserve Bank of Minneapolis President Neel Kashkari shared his view on the collapse of cryptocurrency exchange FTX Friday.
“This isn’t [a] case of one fraudulent company in a serious industry,” he tweeted, elaborating:
Entire notion of crypto is nonsense. Not useful for payments. No inflation hedge. No scarcity. No taxing authority. Just a tool of speculation and greater fools.
Kashkari has never been a fan of bitcoin or crypto. He previously called them “a giant garbage dumpster.” In August last year, he said bitcoin and crypto were “95% fraud, hype, noise, and confusion,” stating: “I’ve not seen any use case other than funding illicit activities like drugs and prostitution.”
Following the FTX meltdown, several Fed officials called for stricter cryptocurrency regulation. Federal Reserve Vice Chair Lael Brainard has stressed the importance of strong cryptocurrency oversight. “It’s really concerning to see that retail investors are really getting hurt by these losses,” she opined.
Michael Barr, Federal Reserve’s vice chair for supervision, said in response to a question at a Senate Banking Committee hearing last week:
We’re concerned about the risks that we don’t know about in the non-bank sector. That includes obviously crypto activity … that can create risks that blow back to the financial system that we do regulate.
While Kashkari believes that the FTX collapse is not the case of one fraudulent company in the crypto industry, some people have pointed out that the exchange meltdown is not crypto-specific. FTX and its former CEO Sam Bankman-Fried have been compared to the Enron fraud or Bernie Madoff’s Ponzi scheme.
Shark Tank star and the owner of the NBA team Dallas Mavericks, Mark Cuban, explained that recent blowups of companies in the crypto space, including FTX, “have not been crypto blowups.” He emphasized: “They have been banking blowups … Lending to the wrong entity, misvaluations of collateral, arrogant arbitrages, followed by depositor runs.”