Sheila Bair, the former chair of the Federal Deposit Insurance Corporation (FDIC), says the time has come for a formal federal regulatory framework to be established to regulate cryptocurrencies.

Bair, who’s on the board of blockchain startup Paxos, said Congress needs to step in to regulate the marketing, trading, and selling of virtual currencies in light of how big the industry has become and the potential for price manipulation and fraud.

“I think it’s a legitimate new asset class,” Bair said at the Yahoo All-Markets Summit in New York September 20. “There’s a lot of stuff in there that’s not particularly valuable. I don’t think this is a space that retail investors should be wading into.”

‘Congress Needs To Step In’

Bair said it’s important for people to distinguish between cryptocurrencies and blockchain technology, which she says “has huge promise.”

“There’s a lot of noise out there [in the crypto space] that’s not worth much of anything,” she said. “I wish we had a federal regulatory framework for it. That would be extremely helpful. The SEC has done a lot of good work, the CFTC as well. But Congress probably needs to step in with some sort of federal regulatory framework for the marketing, trading, and selling of these assets.”

When asked what the regulatory infrastructure should look like, Sheila Bair said the kind used to regulate gold could be one option. But whatever the approach is, it should encourage transparency in the virtual currency market.

“It’s a new asset class, so do you go with a commodities or a securities-and-equity model?” Bair said. “For bitcoin, the closest thing I can think of is gold, so maybe more of a commodity-type regulatory framework would work better. But some of these ICOs are clearly fundraising vehicles and are economically equivalent to securities, so you might have to have some type of bifurcated system.”

‘Robust Controls Against Manipulation’

Bair noted that there are already some safeguards in place to deter the illicit use of cryptocurrencies for money-laundering, but said those rules should be strengthened.

“Regulated trading venues with trade reporting that have robust controls against manipulation in this concentrated market [is needed],” she said. “The important thing is to get a federal regulatory framework in place.”

Bair said whatever rules are currently in place are not appropriate considering how rapidly the digital currency ecosystem has evolved.

“Right now, most of these — if they’re regulated at all — are regulated as money transmitters, which is really forcing a round peg into a square hole,” Bair said. “It just doesn’t work.”

Former FDIC Chair @SheilaBair2013 on cryptocurrency: Right now, most of the regulation is like "forcing a round peg into a square hole." https://t.co/YDlDYww1hZ #YahooAMS pic.twitter.com/FFtMB6XOCo — Yahoo Finance (@YahooFinance) September 20, 2018

Despite some of her reservations about crypto, Bair has underscored that cryptocurrencies like bitcoin should not be banned, as CNN previously reported.

‘I don’t think we should ban it,” Bair said in March 2018. “The green bills in your pocket don’t have an intrinsic value, either. The value is based on what others think is its value. That’s true of any currency.”

Featured image from Flickr/Fortune Live Media.