that a substantial number of investors and other members of the public believe there are little to no benefits from crypto. see “ letter in support of responsible fintech policy, ” june 1, 2022, https : / / concerned. tech /. robert j. shiller, narrative economics : how stories go viral and drive major economic events ( new jersey : princeton university press, 2019 ). - 5same fundamental liquidity and credit risks as traditional assets, and can be highly correlated with other traditional risks, rather than being hedges against such risks. while purveyors of crypto - assets have represented to customers that they are protected through the decentralized nature of the underlying technology, customers are often at a greater risk because those purveyors often find ways to function outside a robust supervisory and regulatory system. in the absence of regulatory compliance, customers don ’ t have the information they need to assess and mitigate their risks. investors do not have the structural protections they have relied on for many decades. as a result, many have been victims of classic cases of fraud and abuse — some appropriately classified as “ ponzi schemes ” under a high - tech veneer. moreover, while crypto - assets are hyped as “ decentralized, ” there has been an emergence of new, quite centralized intermediaries that are either not subject to or not compliant with appropriate regulation and supervision, which has perpetuated harm to consumers. complicating matters further, these entities often seek out jurisdictions with loose or less developed legal and regulatory frameworks for financial activities. and the lack of consolidated home country supervision and coordination with host country supervisors rekindles the kind of abuses that bank regulators long ago quashed. while such cross jurisdictional regulatory arbitrage is not new, the digital nature of these activities provides for greater opportunity to expand the reach of such entities to customers around the world. for example, the prominent collapse of the ftx crypto - asset trading platform has reportedly wiped out the holdings of a million people, costing them billions of dollars. 6 u. s. securities and exchange commission, “ charges samuel bankman - fried with defrauding investors in crypto asset trading platform ftx, ” news release, december 13, 2022, https : / / www. sec. gov / news / press - release / 2022 - 219. - 6unfortunately, that is not the only example. since last summer

have large teams of analysts assessing industry developments, large banks with more resources, and, of course, the public. we plan to continue to publish guidance of this kind as we continue to examine activity in the sector. in addition to sharing what we learn with the public on an ongoing basis, we are also enhancing our supervision of these activities. we are creating a specialized team of experts that can help us learn from new developments and make sure we ’ re up to date on innovation in this sector. special risks associated with stablecoins i want to wrap up today by talking about stablecoins. as chair powell has said, stablecoins are a type of private money, and there is a long and messy history of private - 11 money in the united states that shows the need for robust regulation and oversight. 14 any entity issuing money denominated in the u. s. dollar and drawing on the trust of the federal reserve needs to be subject to federal prudential regulation and supervision. i am not saying anything new here. this has been our consistent approach. stablecoin issuers seek to have — but don ’ t — some of the same characteristics as federally insured bank deposits. stablecoin issuers represent that their liabilities can be redeemed on demand at par, a dollar for a dollar. in fact, however, the assets backing the liability can fluctuate in value. even if the assets backing the claim are high quality, they cannot necessarily be immediately monetized, and operational risks are quite high. as we have seen all too often, depositors sometimes want or need their money immediately, especially in times of stress. this mismatch in value and liquidity is the recipe for a classic bank run. issuers are not supervised by the fed and lack capital and liquidity as a backstop. the banks we regulate, in contrast, are well protected from bank runs through a robust array of supervisory requirements. consider the consequences if a stablecoin not subject to appropriate supervision and regulation were to be adopted as a widespread means of payment, which some stablecoin developers state as a goal. stablecoins have the potential to scale quickly because of network effects. an unregulated, unsupervised, deposit - like asset could create tremendous disruptions, not just for financial institutions but for people who might rely on the coin if it were to get wide adoption. we must learn from the past to ensure that we 14 kyle