U.S. Treasury Secretary Janet Yellen has consistently emphasized the need for a regulatory framework for crypto-currencies and the potential consequences of a central bank digital currency (CBDC). Not once, not twice, the Treasury Secretary has expressed concerns about the lack of a unified regulatory framework for crypto-assets and their issuers. More recently, Ms. Yellen has stressed the importance of regulating the crypto space.
There is currently turbulence in the crypto industry, which has sent many crypto-currencies down. With Bitcoin dropping over 70% from its ATH, Ethereum has also lost its value, followed by other major altcoins. Let’s not forget the TerraUSD crash that caused many to lose their investments.
Treasury Secretary calls for regulatory framework for crypto-currencies
In an interview on October 12, the Treasury Secretary re-emphasized the need to create a regulatory framework for digital assets. Speaking at the International Monetary Fund (IMF) meeting, the Treasury Secretary said that Terra poses some danger to the industry. She also referred to the fact that tether stablecoin has “broke the bank” due to the cryptocurrency crash. According to her, the crypto-currency market has many dysfunctions that need attention. Janet Yellen wants to work with Congress on these “holes“, as the regulation of digital finance is a “difficult thing“. She also mentioned that there are more existing regulations that are applicable to crypto “than people think.“.
Like many who believe in the ability of CBDC to impact the crypto space, the U.S. Secretary of the Treasury shares the same belief. She believes that a CBDC has the potential and the benefits to solve problems in many cases. While it may take time to develop, it “is certainly worth getting involved in its development“, said Janet Yellen.
“We can continue to think about whether to implement it,” but the U.S. should be “in a position where we could issue one.”
FSOC report on security and non-security differences
The Financial Stability Oversight Council (FSOC), of which Janet Yellen is a member, recently issued a report on the direction of securities regulation. The Council wants Congress to define the difference between safety and non-safety. The group said it believes federal agencies have the power to control a large percentage of the crypto industry. Besides Yellen, other prominent names on the council include Federal Reserve Chairman Jerome Powell. Others are Rohit Chopra of the Consumer Financial Protection Bureau director, CFTC chairman Rostin Behnam, and more.
“Certain characteristics of crypto asset activities have greatly amplified the instability of the crypto asset ecosystem. Many crypto asset activities lack basic risk controls to protect against execution risk or to help ensure that leverage is not excessive. Crypto asset prices appear to be driven primarily by speculation rather than based on current fundamental economic use cases, and prices have repeatedly experienced significant and widespread declines“, the report said.