U.S. Treasury Secretary Janet Yellen wants Congress to act on crypto.

Yellen testified before the House Committee on Financial Services on Tuesday and outlined the Financial Stability Oversight Council’s (FSOC) ongoing areas of focus in 2024.

The FSOC is a Treasury office that aims to identify and assess emerging threats to US financial stability.

In her speech, Yellen said the FSOC is concerned that crypto and stablecoins may pose potential risks to the financial system considering that the asset class is largely unregulated.

“The Council is focused on digital assets and related risks such as from runs on crypto-asset platforms and stablecoins, potential vulnerabilities from crypto-asset price volatility, and the proliferation of platforms acting outside of or out of compliance with applicable laws and regulations. Applicable rules and regulations should be enforced, and Congress should pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities. We look forward to continuing to engage with Congress on this.”

Yellen also said the FSOC plans to focus on risks from the banking sector and nonbank financial institutions.

“It supports member agencies’ plans to review whether capital measures appropriately reflect a banking institution’s ability to absorb losses; improve resolvability at large, complex, or interconnected banks; and address vulnerabilities from uninsured deposit levels and depositor composition.

Nonbank financial institutions are an important source of capital in financial markets but also pose potential risks to the financial system, including risks related to liquidity mismatch and leverage.”

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Author: Conor Devitt

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