The US Federal Reserve and the Treasury Department are turning up the heat on cryptocurrency, signalling a crackdown could be coming after several days of volatility in the sector.
US Federal chair Jerome Powell said in a rare video message that cryptocurrencies, which have grown to have a market cap of nearly $US2 trillion ($A2.6 trillion), pose some risks to both individual investors and the broader financial system.
Mr Powell also noted that the Federal Reserve is exploring how and whether cryptocurrencies could improve the current US financial system.
He said the Federal Reserve has been exploring whether it should establish cryptocurrency of its own, called a central bank digital currency, or CBDC.
He said the central bank will publish a discussion paper this summer on the benefits and risks of establishing a CBDC, and will seek public comment.
“We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Mr Powell added.
He also distinguished between volatile cryptocurrencies and so-called stablecoins, which are tied to the value of other currencies such as the US dollar.