Advisors Call Crypto a Potential Risk to The US Stability if There isn’t “Appropriate Regulation”

Advisors Call Crypto a Potential Risk to The US Stability if There isn’t “Appropriate Regulation”.

Government regulators and advisors in a new report are concerned about the risk to financial stability posed by digital assets if their scope or interconnections with traditional financial systems grow without “appropriate regulation.”

US President Joe Biden’s Executive Order, “Ensuring Responsible Development of Digital Assets,” issued on March 9, 2022, prompted the Financial Stability Oversight Council to release a 124-page report on digital assets today.

Regulation on Digital Assets & Crypto

SEC Chair Gary Gensler said regarding the report that “Given that most crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the Securities and Exchange Commission (SEC) in some capacity.”

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Over the past year, U.S. agencies have stepped up their efforts to regulate digital assets, including the U.S. Department of the Treasury, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, but the results have been cumbersome.

“Digital assets have grown significantly in scale and scope over recent years,. They have attracted a large amount of capital and interest from both retail and institutional investors,” said Janet Yellen, Secretary of the Treasury in a statement regarding the report.

She added, “At the same time, we have seen very significant shocks and volatility within the crypto-assets system, particularly over the last year. With the potential for this kind of instability in mind, at our February meeting, the Council named digital assets as one of its key priorities for the year.”

The Risk of Centralization

Moreover, the report cautions about the risks associated with concentration (centralization) of key services and vulnerabilities.

Gensler said, “This market isn’t so decentralized. Now, we see this industry populated by large, concentrated intermediaries, which often are an amalgam of services that typically are separated from each other in the rest of the securities markets.”

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A majority of cryptocurrencies, Gensler believes, are securities, according to his statement.

Bitcoin is one of the crypto assets Gensler has pointed out that should be regulated under the Commodity Futures Trading Commission (CFTC) since it is not a security.

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Jamilatul Mahmudah

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