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U.S. Treasury Secretary: ‘More Effective Oversight of Cryptocurrency Markets’ Is Needed

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U.S. Treasury Secretary Dr. Janet Yellen has spoken out on regulation of crypto markets in the wake of the recent collapse of crypto exchange FTX.

On 11 November 2022, FTX issued the following press release:

And here is how — on the same day — Sam Bankerman-Fried (aka “SBF”) announced the collapse of the FTX empire:

The following video from Wall Street Journal nicely summarizes how FTX went bankrupt:

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Anyway, on 16 November 2022, the U.S. Treasury Secretary released the following statement:

The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets.

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Over the past year, through the President’s Working Group on Financial Markets and in response to the President’s Executive Order on Digital Assets, the Treasury Department worked with its regulatory partners to identify risks in crypto markets.  Some of the risks we identified in these reports, including comingling of customer assets, lack of transparency, and conflicts of interest, were at the center of the crypto market stresses observed over the past week.

We have very strong investor and consumer protection laws for most of our financial products and markets that are designed to address these risks.  Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services.  

The federal government, including Congress, also needs to move quickly to fill the regulatory gaps the Biden Administration has identified.  In terms of financial stability, spillovers from the events in crypto markets have been limited, but a recent report by the Financial Stability Oversight Council, which Treasury chairs, warned that further interconnections of the traditional financial system and crypto markets could raise broader financial stability concerns.

Going forward, it’s vital we do what is necessary to address these concerning risks and act to protect consumers and promote financial stability.

Yellen “served as the Chair of the Federal Reserve from 2014 to 2018, and as Vice Chair from 2010 to 2014.”

According to a report by Coindesk published on 24 November 2020, here are some comments made by Yellen about cryptocurrency and blockchain technology while she was working as the Fed chair:

  • February 2014: “The Fed doesn’t have authority to supervise or regulate bitcoin in any way.
  • October 2015: “We do not interpret bitcoin’s popularity as having a relationship with the public’s view of the Federal Reserve’s conduct of monetary policy.
  • September 2016: “[Blockchain] could have very significant implications for the payments system and the conduct of business.
  • January 2017: “[Blockchain] is a very important, new technology that could have implications for the way in which transactions are handled throughout the financial system.
  • December 2017:
    • It [i.e. Bitcoin] is not a stable store of value and it doesn’t constitute legal tender. It is a highly speculative asset.
    • The Fed doesn’t really play any role, any regulatory role with respect to bitcoin other than assuring that banking organizations that we do supervise are attentive that they’re appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering [and] Bank Secrecy Act responsibilities that they have.
  • October 2018: “I will just say outright I am not a fan [of Bitcoin], and let me tell you why. I know there are hundreds of cryptocurrencies and maybe something is coming down the line that is more appealing but I think first of all, very few transactions [that] are actually handled by bitcoin, and many of those do take place on bitcoin are illegal, illicit transactions.
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