U.S. Treasury Secretary Janet Yellen is set to warn about the dangers of cryptocurrency platforms and stablecoins, and she will encourage Congress to create new laws during a congressional hearing on Tuesday.
Leading the Financial Stability Oversight Council, a group responsible for ensuring the financial system’s stability, Yellen will speak to the House Financial Services Committee about the council’s latest yearly report.
Referring to the collapse of the cryptocurrency exchange FTX as a critical moment similar to the Lehman Brothers failure in 2008, which led to a global financial crisis, Yellen will explain to lawmakers that the council remains focused on the threats posed by cryptocurrencies.
“In our view, digital assets and the challenges they present, like the risk of mass withdrawals from crypto platforms and stablecoins, the danger from price swings in cryptocurrencies, and the growth of platforms that don’t follow the law, are important concerns,” Yellen’s prepared remarks state.
She will add that Congress should enact laws and that existing regulations need to be applied more strictly. Lawmakers are already drafting laws aimed at stablecoins and broader market regulations, as well as measures to prevent money laundering through cryptocurrencies.
The council has pointed out the risks of cryptocurrency, such as its volatility and how interconnected the crypto industry is, in its annual report for 2023, published in December.
Additionally, the committee plans to discuss reversing a directive from the Securities and Exchange Commission (SEC) in the Tuesday hearing. They will discuss a proposal to reject an SEC bulletin that has been controversial among crypto supporters. This bulletin, known as SAB 121, issued in March 2022, requires companies holding cryptocurrencies for customers to list those holdings as liabilities, which has been criticized by some in the crypto community. SEC Chair Gary Gensler defends the bulletin, saying it protects customers in case of bankruptcy.
Sen. Cynthia Lummis, along with Reps. Mike Flood and Wiley Nickel have proposed a resolution to counter the SEC’s bulletin. Nickel and Flood are the House Financial Services Committee members and are actively involved in this legislative effort.
