Cryptocurrencies 'Could Pose Risks' to Stability of US Economy, Treasury Warns
The Department of Treasury’s Financial Stability Oversight Council delivered research on cryptocurrency regulation recommendations, noting the importance of legislative participation.
Earlier this week, the U.S. Treasury’s Financial Stability Oversight Council released a new report documenting the financial stability of the digital asset marketplace, as well as the risks that come with applying regulations to the growing industry.
The report, titled “Report on Digital Asset Financial Stability Risks and Regulation,” was initially commissioned when President Joe Biden signed his landmark executive order asking for more federal research on cryptocurrency and its economic impact.
Noting that U.S. participation in the crypto and digital currency marketplace has steadily grown, Treasury officials said that the unregulated asset class could have a negative impact on the U.S. economy as they interact with regulated financial institutions, particularly with assets not considered securities.
“Crypto-asset activities could pose risks to the stability of the U.S. financial system if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory structure,” the report reads.
The Council ultimately issued several recommendations to mitigate the risks of cryptocurrency in the face of gaps in oversight. These include developing regulations, continued enforcement, regulatory arbitrage, using accurate data to create and enforce new regulations, and increasing member agencies’ capacity to oversee digital asset data and activity.
One key point the Council included in its recommendations was that Congress pass legislation designed to provide more rulemaking authority for financial regulators in regards to crypto-assets that are not securities.
Some lawmakers have already introduced bills that would apply more regulatory provisions within the cryptocurrency industry, mainly focusing on user protections.
In response to the Council’s report, Rep. Raja Krishnamoorthi, D-Ill., issued a statement on Tuesday that thanked Treasury for its work on researching digital asset regulation.
“I acknowledge the Treasury Department for taking the important step of recognizing the financial harm that crypto-related fraud and scams cause everyday investors, who have been drawn to the United States’ fastest growing asset class by stories of skyrocketing prices and overnight riches,” he said. “As the Treasury Department works to implement its recommendations in conjunction with other U.S. regulatory and law enforcement entities, I trust that it will maintain focus on how the U.S. government can combat fraud and scams that are fleecing American consumers and work to ensure that the cryptocurrency ecosystem becomes a safer place for investors.”
NEXT STORY: National Archives Plans CX Research