KEY POINTS
- Yellen will call for legislation to regulate the 'spot market for crypto-assets that are not securities'
- The US Treasury secretary previously called for a 'more effective oversight' of crypto markets after FTX's collapse
- CFTC chair just last week raised concerns about the SEC approval of 11 spot Bitcoin ETFs
U.S. Treasury Secretary Janet Yellen on Tuesday is set to warn Congress about the potential risks from cryptocurrencies and stablecoins and urge the U.S. Congress to pass legislation that will establish the regulatory framework for crypto, including rules for stablecoins and spot market for crypto assets.
Yellen will appear before the U.S. House of Representatives' Committee on Financial Services Tuesday to tell lawmakers that the Treasury is "focused on digital assets and related risks such as from runs on crypto-asset platforms and stablecoins," as well as possible vulnerabilities associated with the volatility of crypto asset prices, as per a pre-released statement.
The statement notes that Yellen will provide lawmakers with the Treasury's observations regarding the proliferation of platforms that act "outside of or out of compliance" with applicable regulations.
She will urge U.S. lawmakers to pass legislation that will specifically establish regulations for "stablecoins and of the spot market for crypto-assets that are not securities."
This is not the first time Yellen has raised concerns about the rise of cryptocurrency and risks associated with it.
Following the "crypto winter" in November that was driven by the collapse of fraud-ridden crypto exchange FTX, Yellen called for "more effective oversight of cryptocurrency markets." She said at the time that the federal government should move "quickly" to fill in the regulatory gaps in the crypto sector to prevent a similar FTX scenario that had an "unfortunate impact" on crypto investors.
Early last year, Yellen told Reuters during the sidelines of the G20 meeting in India that the U.S. Treasury has not yet recommended an "outright" ban of crypto operations, but she noted that "it is critical to put in place a strong regulatory framework." She revealed at the time that the Treasury was cooperating with other governments regarding the matter.
Yellen's renewed call for more stringent crypto regulations came about a week after Commodity Futures Trading Commission (CFTC) chair Rostin Behnam raised serious concerns about the Securities and Exchange Commission's (SEC) approval of 11 spot Bitcoin exchange-traded funds (ETFs).
Behnam said he fears that the ETFs' approval may introduce more risks linked to digital asset spot markets. With the historical breakthrough in crypto history, Behnam said "the need for federal legislation over cash market digital assets has never been more critical."
The CFTC has limited authority over digital asset spot markets. However, nearly half of the commission's actions filed in fiscal year 2023 were related to digital asset commodities.
