Crypto poses financial stability risks
US Interagency group headed by Treasury Secretary Janet Yellen red flags over crypto-led fin stability risks; It called on Congress to pass legislation to address the systemic risks caused by growth of stablecoins
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As we've painfully learned from history, innovation without adequate regulation can result in significant disruptions and harm to the financial system, said Yellen
Washington: Top regulators recommended a series of new safeguards to ensure that a growing and unregulated cryptocurrency market doesn't imperil US financial stability. Among seven major recommendations, regulators called on Congress to pass legislation that would address the systemic risks caused by the growth of stablecoins, which are a form of cryptocurrency pegged to the price of another financial asset, like the US dollar or gold. Recent volatility in the cryptocurrency market, especially in stablecoins, has made regulators particularly wary about the need for regulation as usage of the digital asset continues to grow.
Members of the Financial Stability Oversight Council met on Monday to approve the recommendations of a 125-page report created in response to President Joe Biden's March executive order on digital assets. The report also calls for giving agencies greater regulatory power over cryptocurrencies and digital assets.
The oversight council is an interagency group headed by Treasury Secretary Janet Yellen and includes Federal Reserve Chairman Jerome Powell. Created in the wake of the 2008 financial crisis, the role of the council is to identify risks and emerging threats to US financial stability.
Powell, who has recently said stablecoins will need greater regulation as they become more widely used by consumers, said on Monday that "acting now will allow us to support responsible financial innovation while preserving financial stability."
