Janet Yellen Sounds Alarm On Crypto Risks In Congressional Testimony, Urges Legislative Action

U.S. Treasury Secretary, Janet Yellen, is gearing up to discuss the potential hazards the cryptocurrency industry could inflict on the financial system with Congress.

What Happened: Yellen’s forthcoming testimony to the House Financial Services Committee will underline the risks tied to stablecoins, crypto platform runs, and price volatility, CoinDesk reported on Tuesday. Under Yellen’s leadership, the Financial Stability Oversight Council (FSOC) has been keeping a close watch on these risks.

The FSOC, established to avert future financial crises, has identified crypto risks as a primary concern.

“The council is focused on digital assets and related risks such as from runs on crypto-asset platforms and stablecoins, potential vulnerabilities from crypto-asset price volatility, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations,” Yellen clarified in her prepared testimony.

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Yellen also unveiled her intentions to collaborate with Congress on cryptocurrency legislation, emphasizing that “applicable rules and regulations should be enforced, and Congress should pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities.”

Why It Matters: The U.S. government has been actively engaging with the crypto industry. In a recent development, Sen. Cynthia Lummis (R-Wyo.) expressed optimism about the enactment of U.S. stablecoin legislation within the first half of 2024, following intense discussions involving Democrats, Republicans, the U.S. Senate, and the House of Representatives.

Earlier, SEC chief Gary Gensler reiterated his belief that many digital currencies fall under existing securities regulations, despite significant resistance from the crypto community. This perspective, which emphasizes that cryptocurrency enterprises are bound by the same guidelines as traditional finance institutions, was reiterated by Gensler during his speech at the 2023 Securities Enforcement Forum.

In November, the International Organization of Securities Commissions (IOSCO) released its Final Report with Policy Recommendations for Crypto and Digital Asset (CDA) Markets, aiming to provide a coordinated global regulatory response to the evolving landscape of crypto-assets.

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