U.S. Treasury Secretary Janet Yellen is calling on Congress to enact new laws specially calibrated for crypto, hoping to combat systemic risks that existing laws can’t cover.
“Congress should pass legislation to provide for the regulation of stablecoins, and of the spot market for crypto assets that are not securities,” said Yellen during a hearing before the House Financial Services Committee (HFSC) on Tuesday.
Acknowledging that current rules and regulations should also be enforced, the cabinet member cited various ways that digital assets could impact the nation’s financial stability, including “runs” on exchanges or stablecoin providers, along with the trademark volatility of the crypto market.
Yellen has been calling for a new regulatory framework on stablecoins for years, citing concerns about their growth as a means of payment and use for money laundering.
However, bipartisan deadlock within Congress has made all forms of crypto legislation move at a snail’s pace, with Democrats often questioning whether crypto deserves any dedicated focus from Capitol Hill at all.
Meanwhile, the nation’s two chief market regulators still can’t agree on which crypto assets fall under their jurisdiction based on existing laws. The Securities and Exchange Commission (SEC) takes the stance that virtually all cryptos are securities and has sued Coinbase and other large crypto exchanges based on that premise.
Yellen’s comments may reflect a divergence of views from the SEC. The agency’s chairman, Gary Gensler, maintains that existing laws are adequate and that crypto industry leaders are simply “choosing” not to follow the law.
“There are many areas with respect to digital assets where we do have clear regulatory authority, but we’ve identified some gaps,” said Yellen when questioned by HFSC chair Patrick McHenry on the matter.
“The CFTC, for example, doesn’t have supervisory regulatory authority with respect to spot markets in commodities like Bitcoin,” she added. Thus far, Bitcoin (BTC) is the only cryptocurrency that all relevant branches of government agree is not a security.
On stablecoins, Yellen said a federal regulator should be able to shut down a stablecoin issuer that doesn’t meet a nationwide “regulatory floor,” and that it’s “critical” that regulatory protections be created for stablecoin wallet holders.
Tether, the issuer of the world’s largest stablecoin, has almost issued 100 billion dollar-backed USDT tokens across all blockchains.
Edited by Ryan Ozawa.