Steven Mnuchin, US Treasury Secretary, and Jerome Powel, Chairman of the Federal Reserve, both urged state and federal officials to increasingly monitor digital assets.
FSOC: Crypto Must Be Watched
Through the annual report sent by the Financial Stability Oversight Council (FSOC) that came on Wednesday, the group urges other firms to monitor the various types of crypto. The FSOC was established after 2008 with its directive being to identify new risks that could lead to triggering another banking crisis. Among the panel stand Jay Clayton, Chairman of the US Securities and Exchange Commission (SEC), and Heath Tarbert, chairman of the Commodity Futures Trading Commission (CFTC).
The report states that the council urges regulators, both federal and state, to continue monitoring the various risks associated with digital assets and its distributed ledger technology. In particular, it urges to examine the dangers it holds for the current financial system.
Anti-Crypto vs Pro-Crypto
Administration officials and lawmakers within the US have repeatedly warned against things like cryptocurrencies. People like President Donald J. Trump and Mnuchin warned that the financial system is at significant risk against crypto and stablecoins. A prime example of this would be Libra. Prior to the heavy scrutiny it received, Libra threatened to destroy the current financial system through undermining countries and their state-owned currencies.
Standing in opposition to these groups are people like Christopher Giancarlo, the former CFTC chairman. Giancarlo has pushed for an even faster adoption of blockchain technology. He argued that the US could potentially fall behind other countries as technology rapidly develops further.
The report states that both existing and planned “digital-asset arrangements” has the potential to put the financial industry’s general stability at risk. The report says it is through “both direct and indirect connections with banking services, financial markets, and financial intermediaries.”
The Many Problems Involved
Among other things, the report also highlights “risks to consumers, investors, and businesses associated with potential losses or instability in market prices.” As one would expect, the report also touches base with the illegal side of crypto as well. It cites “illicit financial risks; risks to national security; cybersecurity and privacy risks; and risks to international monetary and payment system integrity.”
Back in January of 2018, Munic stated that the FSOC had created a working group whose only focus was on crypto. Even earlier, the council noted that the use of decentralized ledgers as a means of data storage would raise various challenges for regulators that are accustomed to centralized systems.
What this means for the US regulating crypto going forward is unclear, but with the looming threat of China releasing its own form of crypto, things aren’t looking good. It’ll only be a matter of time before the US gets taken down a few pegs, should they keep scrambling around the crypto issue for too long.