The Treasury Department’s Financial Stability Oversight Council (FSOC) is weighing in on crypto assets and their potential impacts on the traditional US financial structure.
The council, which was established by the Dodd-Frank Act to assist in identifying financial stability issues in the United States, asserts that uncontrolled crypto assets such as stablecoins and lending and borrowing on the industry’s trading platforms as an important emerging vulnerability.
“Crypto-asset activities could pose risks to the stability of the U.S. financial system and emphasise the importance of appropriate regulation, including enforcement of existing laws,” Treasury Secretary Janet Yellen said. “It is vital that government stakeholders collectively work to make progress on these recommendations.”
Even while space’s relationship to the conventional system is still very minor, choke points such as stablecoins and trading platforms might pose problems in the future, according to the Financial Stability Oversight Council.
Though interconnections with the traditional financial system are somewhat limited at present, they have the potential to expand significantly. Ecosystem participants have investigated and established numerous links between the crypto asset ecosystem and the traditional financial system. Possible connectivity sources include traditional assets held in conjunction with a stablecoin activity.
By offering various services, such as leveraged trading and asset custody, to a broad spectrum of individual investors and conventional financial institutions, crypto-asset trading platforms may have more comprehensive interconnectivity. Additionally, consumers have greater access to crypto-asset activities, even via certain traditional money services firms.
According to the council, compliance with and enforcing current standards is crucial in managing possible hazards. The report also suggests boosting regulatory bodies’ data and knowledge of crypto-assets to combat the industry’s potential risks.
