Seantor Warns of Crypto-Related Endangerments to the Financial Stability of the United States

Treasury Secretary Janet Yellen underscored the hazards that cryptocurrencies pose to the stability of the U.S. financial system during a recent session of the Financial Stability Oversight Council (FSOC).

She urged for immediate legislative action to regulate the sector and mitigate these risks. Yellen had previously expressed apprehensions about cryptocurrency, particularly dollar-backed stablecoins, earlier in the year. She suggested that certain organizations should be prohibited from issuing such assets.

The potential hazards that these digital assets pose to financial stability were underscored by the collapse of the Terra ecosystem in 2022, when its UST stablecoin lost its basis. Yellen’s warning is consistent with bipartisan initiatives, including a proposed bill by Senators Cynthia Lummis and Kirsten Gillibrand that would prohibit algorithmic stablecoins such as UST.

Yellen reiterated the necessity of establishing a regulatory framework to address the accelerated growth of the crypto market in her most recent remarks. Nevertheless, she has also recognized that cryptocurrencies, particularly Bitcoin, provide certain advantages, such as payment innovation.

Scott Bessent, a hedge fund manager who has been nominated to succeed Yellen, has a more optimistic perspective on cryptocurrencies. Known for his pro-crypto posture, Bessent is of the opinion that the cryptocurrency economy is enduring and presents new opportunities, particularly for younger, previously underserved individuals.

Also Read: Ripple’s David Schwartz hopes the stablecoin launches by year’s end but acknowledges hurdles