US Financial System Exposed to Cryptocurrency Risks, Says Treasury Secretary Yellen
During a recent meeting of the Financial Stability Oversight Council (FSOC), Treasury Secretary Janet Yellen expressed concerns about the exposure of the US financial system to cryptocurrency-related risks. Yellen emphasized the need for comprehensive legislation to address these risks and protect financial stability.
Urgent Call for Crypto Regulation
The FSOC is urging lawmakers to pass legislation that specifically targets the regulation of cryptocurrencies in order to mitigate the potential risks they pose. Yellen has been vocal about the need for urgent crypto regulation, especially following the collapse of the Terra ecosystem in May 2022.
Stablecoin Risks Highlighted
Yellen has highlighted the risks associated with stablecoins, particularly dollar-backed stablecoins like UST. She has called for measures to prevent certain entities from issuing such products, citing the de-pegging of UST as a clear illustration of the dangers stablecoins can pose to financial stability.
Bipartisan Efforts for Stablecoin Regulation
A bipartisan stablecoin bill proposed by U.S. Sen. Kirsten Gillibrand and Sen. Cynthia Lummis aims to ban algorithmic stablecoins like UST. This legislative effort underscores the growing consensus among policymakers about the need for stricter regulations in the cryptocurrency market.
Prudential Framework for Crypto Market
In her recent remarks, Yellen reiterated the importance of establishing a “prudential framework” for the rapidly expanding cryptocurrency market. This framework is essential to ensure the stability and integrity of the financial system in the face of increasing crypto-related risks.
Benefits of Crypto Innovation
While acknowledging the risks, Yellen also recognized the benefits of cryptocurrency innovation, particularly in the realm of payment technology. She emphasized that payment innovation can be a positive development and a catalyst for financial inclusion and accessibility.
Pro-Crypto Sentiment from Incoming Treasury Secretary
American hedge fund manager Scott Bessent, who has been nominated to replace Yellen, has expressed a pro-crypto stance. Bessent believes that the cryptocurrency economy is here to stay and sees Bitcoin as an exciting opportunity to engage new market participants, especially young people and those who have not previously participated in financial markets.