Sheila Bair is a former chair of the federal deposit insurance corporation (FDIC) and says the time has come for formal federal regulation to be established to regulate cryptocurrencies, in an interview with Yahoo finance.

Bair is on the board of the blockchain start-up Paxos and said that cryptocurrencies are a legitimate asset class but not something retail investors should be investing in. She argues that people need to see the difference between the blockchain technology and cryptocurrencies. Blockchain will generate huge value for the society and be disruptive for many industries, but regarding cryptocurrencies, people should be more careful. However, many of the cryptocurrencies out there are worth next to nothing according to Bair.

“I think it’s a legitimate new asset class,” Bair said at the Yahoo all market 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.”

Bair wishes that we had a regulatory framework which would be beneficial for everyone. As it is now, most of the new asset class is bound to now rules and functions in a decentralized environment.

“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 is doing a lot of good work, the CFTC as well. But Congress probably needs to step in with some federal regulatory framework for the marketing, trading, and selling of these assets.”

When asked what a regulatory framework could look like, Sheila Bair proposed that regulations for money laundering and manipulation could be strengthened. Furthermore, she says that the closest comparison for Bitcoin is gold and a regulatory framework similar to gold and commodities could be an option. The most important thing is to get a regulatory framework in place though.

The market for cryptocurrencies are evolving very fast according to Bair and the rules we have in place today are not appropriate moving on, the regulations need to move as fast as the market does.

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

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