“These risks, if not well controlled, can harm retail investors and cut against the goals of a safe and fair financial system,” Barr said.
The collapse of FTX occurred outside the banking system, Barr noted, a focus of his oversight.
“But recent events remind us of the potential for systemic risk if interlinkages develop between the crypto system that exists today and the traditional financial system,” he said.
Regarding the banking system overall, most large banks have healthy levels of cash reserves, Barr said, beyond even what is required by regulation.
But with the economy slowing as the Fed rapidly lifts interest rates, banks may come under more stress, he said.
The “economic outlook has weakened," increasing uncertainty, Barr said. “A weaker economy could put stress on households and businesses and, thus, on the banking system as a whole.”