- An unregulated cryptocurrency economy threatens the stability of the US financial system.
- The council lobbied for laws requiring more rigorous regulation of cryptocurrency.
- Over 100 central banks around the world are creating a digital currency.
Top authorities suggested a number of new protections on Monday to make sure that the stability of the US financial system is not jeopardized by a developing and unregulated cryptocurrency industry.
Regulators asked Congress to enact legislation to address the systemic risks brought on by the rise of stablecoins, a type of cryptocurrency tied to the price of another financial asset, such as the US dollar or gold, as one of their seven main recommendations.
Regulators are particularly cautious about the need for regulation as the usage of digital assets continues to increase due to recent volatility in the cryptocurrency market, particularly in stablecoins.
“The increasing popularity of stablecoins and other digital assets has raised concerns about their systemic risks, including the potential for market manipulation and price bubbles,” said acting Chairwoman of the Securities and Exchange Commission (SEC) Stephanie Avakian in a statement.
During a meeting held on Monday, members of the Financial Stability Oversight Council approved the conclusions of a 125-page study written in response to President Joe Biden’s executive order on digital assets in March.
The research also urges providing governments more authority to regulate virtual currencies and other digital assets.
As more Americans engage in cryptocurrencies, the council declared at the beginning of the year that it would concentrate its efforts on learning more about these concerns and offering suggestions.
Approximately 40 million adult Americans, or 16% of the population, have invested in cryptocurrencies, according to a Pew Research Center survey from September 2021. And 43% of men between the ages of 18 and 29 have invested in cryptocurrencies.
Treasury, according to Yellen, advises the United States to “advance policy and technical work on a prospective central bank digital currency, or CBDC, so that the country is ready if CBDC is decided to be in the national interest.”
A digital currency is being considered by more than 100 central banks worldwide, but just a few have actually introduced one.
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