Treasury Secretary Janet Yellen has made a loud call for Congress to enact legislation aimed at regulating the cryptocurrency market.
Treasury Secretary Janet Yellen has made a loud call for Congress to enact legislation aimed at regulating the cryptocurrency market.
The urgency of this call comes in the wake of the collapse of the FTX cryptocurrency exchange, which has exposed critical vulnerabilities in the digital asset space.
Address the regulatory gap
Attention has focused on gaps in the regulation of digital assets and Secretary Yellen has emphasized the need for explicit legal frameworks to govern the spot market for digital assets that are not classified as securities.
His push for legislation is accompanied by repeated warnings about the lack of oversight in digital asset markets.
The proposed Financial Technology and Innovation Act aims to provide federal regulators with authoritative oversight of digital asset markets and seeks to address the lack of clear regulatory structures currently affecting the industry.
The FSOC 2022 report stressed The absence of direct oversight, the potential for regulatory arbitrage, and the insufficiency of market structures under current laws are areas of major concern.
This legislation would not only bring clarity to the treatment of digital assets, but would also strengthen the protection and disclosure of customer information, aligning them more closely with existing financial regulatory systems.
Risks of stablecoins
In her testimony, Secretary Yellen mentioned that stablecoins, in particular, present risks to the financial system that require a well-defined regulatory approach.
Addressing lawmakers, Yellen stressed that a federal regulator should have the power to prevent certain entities from issuing stablecoins, seeking to establish a regulatory “floor” that would standardize compliance across states.
Despite bipartisan tensions, a bill regulating the stablecoin has made progress, although it is pending a vote in the House.
