U.S. Treasury Secretary Janet Yellen, leading the Financial Stability Oversight Council, addressed lawmakers about the risks cryptocurrencies pose to the U.S. financial system and called for regulations.
During the presentation to the House Financial Services Committee, Yellen detailed concerns over the potential for market instability driven by the rapid growth and volatility of crypto assets.
Financial Volatility and Crypto Legislation
Yellen referenced recent turmoil in the crypto market as a stark reminder of these risks, reinforcing the need for a regulatory framework that includes oversight of stablecoins and measures to ensure platforms comply with financial laws.
“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,” said Yellen. “And the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations.”
“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,” said Yellen.
Janet Yellen at a House Financial Services Committee hearing.
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In addition to addressing the challenges posed by crypto, Yellen discussed the broader financial landscape and the Biden Administration’s efforts to bolster economic recovery.
Yellen also emphasized the importance of monitoring other systemic risks to maintain financial stability. These include vulnerabilities in the commercial and residential real estate sectors, global geopolitical conflicts, and technological developments.
Yellen Calls Crypto ‘Particular Concern’
In June 2023, during a session with the Senate Finance Committee Janet Yellen expressed significant concerns about the role of crypto in financial misconduct, stating, “cryptocurrencies are a particular concern,” in terms of terrorist financing.
Further elaborating on the issues posed by digital currencies, Yellen pointed out their prevalent use in unlawful transactions.
“I think many [crypto] are used, at least in a transaction sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels,” said Yellen.
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