U.S. Treasury Secretary Yellen Cites Crypto Risks, Urges Regulation
U.S. Treasury Secretary Janet Yellen has addressed lawmakers, emphasizing the risks that cryptocurrencies pose to the country’s financial system. Speaking before the House Financial Services Committee, Yellen called for the regulation of crypto assets to mitigate potential market instability caused by their rapid growth and volatility.
Yellen pointed to recent turmoil in the crypto market as evidence of these risks, making a strong case for the implementation of a regulatory framework. She specifically highlighted the importance of oversight for stablecoins and measures to ensure that platforms comply with financial laws.
The Council is focused on digital assets and related risks such as from runs on crypto-asset platforms and stablecoins, potential vulnerabilities from crypto-asset price volatility, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations, Yellen stated.
Recognizing the need for action, Yellen recommended that applicable rules and regulations should be enforced and urged Congress to pass legislation specifically targeting stablecoins and the spot market for non-security crypto-assets.
Apart from addressing the challenges posed by cryptocurrencies, Yellen discussed the broader financial landscape during her testimony. She highlighted the Biden Administration’s efforts to strengthen economic recovery and stressed the significance of monitoring other systemic risks to maintain financial stability. These risks include vulnerabilities in the commercial and residential real estate sectors, global geopolitical conflicts, and the impact of technological advancements.
This isn’t the first time Yellen has expressed concerns about the role of cryptocurrencies in financial misconduct. In a session with the Senate Finance Committee back in June 2023, she highlighted the potential for cryptocurrencies to facilitate terrorist financing. Yellen also pointed out their prevalent use in illicit transactions, noting the need to curtail their usage and prevent money laundering.
As regulators and lawmakers grapple with the growing influence of digital currencies, Yellen’s call for regulation reflects the increasing need to establish a comprehensive framework. By addressing potential risks and advocating for oversight, Yellen aims to protect the stability of the U.S. financial system.
With concerns over market instability and illicit activities surrounding cryptocurrencies, the conversation around their regulation is likely to gain momentum in the coming months. As Congress contemplates the necessary legislation, the future of cryptocurrencies and their role in the financial landscape hangs in the balance.
