Bitcoin is 'something that regulators must face but not ban', says the former president of the FDIC

Former FDIC president Sheila Bair told CNBC on Thursday that cryptocurrencies such as Bitcoin should be more strictly controlled but not banned.

"I think some additional regulation would be good, and I would advocate that," Bair told "Fast Money." "Especially," he continued, "about the laws against money laundering, where I think there are many concerns about the use of Bitcoin or other digital currencies."

The cryptocurrencies fluctuated rapidly this week due to regulatory concerns and South Korea's announcement that it was considering banning the digital currency, which caused investor mistrust and subsequently massive sales. So far, about a dozen countries, including France, Bolivia and Russia, have proposed banning cryptocurrencies or already have one.

"Bitcoin and other digital currencies would benefit from increased scrutiny to ensure there is no manipulation or fraud," said Bair, a former president of the Federal Deposit Insurance Corporation under President George W. Bush.

Bush during the 2008 financial crisis. "Clear disclosures would also help people make informed decisions when they are investing," he said.

"But prohibiting the asset class would be a mistake," said Bair, who now serves as a board member of Paxos, a financial firm that develops blockchain technology for digital currencies. He also clarified that he does not own any Bitcoin.

Instead he pointed out that, "digital currency is something that regulators should try, but not prohibit."

"We do not prohibit assets," he argued. "Where does that stop?"

"There are many products that ... in the minds of many people have a questionable value," he explained. "But traditionally in the USA. UU, we have allowed markets to value products and determine what the value is ".

The unpredictable crypto market, in which Bitcoin is the most popular, lost approximately $ 200 billion as a result of sales earlier this week. That represented a third of its value since the commercial peak in mid-December.

Once valued at approximately USD 19,500 per coin, the Bitcoin value fell below USD 10,000 in a short period of time on Tuesday.

By Thursday, Bitcoin and other cryptocurrencies, including Ripple and Ethereum, were on the rise once again. Bitcoin briefly exceeded 12,000 USD, an increase of more than 30% from the previous day. But prices still fell more than 40% from December's peak prices.

The volatile nature of cryptocurrencies and the potential for large-scale gains could be what attracts some market observers.

Bair's biggest concern is that people invest in something they do not understand.

"I worry that people are getting into this because they see the dizzying benefits and the huge increase in value without really understanding what it is about."

Source: CNBC