US Treasury Secretary Janet Yellen has long been considered a crypto skeptic. The politician has now warned the US Congress of the dangers that the crypto sector poses to financial stability.
• Yellen warns of crypto dangers in speech to US House of Representatives
• FSOC authority increasingly targets cryptocurrencies
• Crypto investors demand clear regulations
There is currently no stopping the Bitcoin price: the original cryptocurrency has been on an impressive rally since the beginning of 2023. Thanks to the prospect of interest rate cuts, a brilliant comeback by the tech sector and the approval of Bitcoin spot ETFs by the US Securities and Exchange Commission (SEC), cryptocurrencies – especially Bitcoin – set off real price fireworks.
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Most recently, Bitcoin even surpassed the much-noticed $50,000 mark and is increasingly approaching its record high of November 8, 2021 at $67,566.83. While some analysts expect Bitcoin’s all-time high to be broken soon, there could still be trouble from regulators, as US Treasury Secretary Janet Yellen’s speech to the US Congress made clear.
Yellen explains FSOC’s efforts to Congress
Yellen spoke before the House Financial Services Committee in early February to explain recent efforts by the Financial Stability Oversight Council (FSOC). The FSOC is a coalition of heads of American financial authorities, chaired by Yellen. The Council, tasked with proactively preempting potential financial crises, has paid close attention to the risks associated with cryptocurrencies in recent years, making them one of its key concerns.
“The Council [FOSC, Anm. d. Red.] focuses on digital assets and associated risks, such as the rush to crypto asset platforms and stablecoins, potential vulnerabilities from crypto asset price volatility, and the proliferation of platforms trading outside of applicable laws and regulations,” is included in Yellen’s speech transcript, which can be viewed on the FSOC website.
Yellen identifies potential threats
In her testimony before the House of Representatives – one of the two parts of the US Congress along with the Senate – Yellen highlighted several potential threats that the cryptocurrency industry poses to the financial system. She specifically cited the dangers of stablecoins, the risks of mass panic selling (runs) on crypto platforms, and the inherent volatility of prices.
Yellen has long emphasized the importance of transparent regulations and guidelines to curb the perceived unpredictability of the crypto sector. To this end, she is working closely with Congress. “Applicable rules and regulations should be enforced, and Congress should enact legislation to ensure the regulation of stablecoins and the spot market for non-securities crypto assets,” Yellen highlighted.
Not a new initiative yet – but regulatory pressure is increasing
Overall, Yellen’s remarks to the US Parliament were quite general; there was no mention of a new initiative. However, the fact that the US Treasury Secretary made digital assets one of the main topics of her speech shows that the crypto sector is in the spotlight of the US government’s financial concerns. According to CNBC, the USA is considered the “top cop” worldwide when it comes to regulating the crypto sector. A phalanx of SEC, the Commodity Futures Trading Commission (CFTC), the Department of Justice and the Financial Crimes Enforcement Network (FinCen) has formed to monitor and regulate cryptocurrencies and digital assets.
As a result of the intensive efforts of the US authorities, a crypto exodus has been observed in recent months: a growing number of cyber companies are turning their backs on the USA in order to settle in supposedly more crypto-friendly states. For example, two crypto market makers Jane Street and Jump Crypto reduced their trading activities in the US.
However, it remains to be seen whether this trend will continue in 2024. The decisive factor will be whether the US Congress can pass more binding and clearer regulations to put an end to the often denounced lack of transparency and confusion in the crypto industry. Yellen’s speech to the House of Representatives can be interpreted as a step in this direction.
Editorial team finanzen.net