The US Financial System Faces Cryptocurrency Risks, Says Treasury Secretary Yellen
During a recent meeting of the Financial Stability Oversight Council (FSOC), Treasury Secretary Janet Yellen highlighted the exposure of the US financial system to risks associated with cryptocurrencies.
Yellen emphasized the importance of passing comprehensive legislation for cryptocurrencies to address these risks effectively, as urged by the FSOC.
Earlier this year, Yellen had called for urgent regulation of the crypto market, particularly focusing on dollar-backed stablecoins and advocating for measures to prevent certain entities from issuing such products.
The collapse of the Terra ecosystem in May 2022, and the subsequent de-pegging of UST, served as a stark reminder of the potential risks that stablecoins pose to financial stability.
In response to these concerns, a bipartisan stablecoin bill proposed by Senators Kirsten Gillibrand and Cynthia Lummis aims to ban algorithmic stablecoins like UST.
Yellen reiterated the need for a “prudential framework” for the rapidly expanding cryptocurrency market in her recent statements.
While acknowledging the benefits of cryptocurrencies, Yellen emphasized the importance of regulating the sector to ensure financial stability.
Scott Bessent, a hedge fund manager nominated to replace Yellen, has expressed a positive stance on crypto, stating that the cryptocurrency economy is a permanent fixture.
Bessent highlighted the appeal of Bitcoin in attracting new participants to the market, emphasizing its role in driving innovation and engagement among a diverse range of investors.