Top US Regulators Urge Congress to Pass Legislation on Crypto Assets

The U.S. Financial Stability Oversight Council (FSOC), a group of the country’s top financial regulators, has urged Congress to pass legislation for the regulation of crypto assets. Treasury Secretary Janet Yellen said: “Crypto-asset activities could pose risks to U.S. financial stability if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory structure.”

U.S. Financial Stability Oversight Council’s Recommendations

The U.S. Financial Stability Oversight Council (FSOC) published its “Report on Digital Asset Financial Stability Risks and Regulation” Monday. The 124-page report includes 10 recommendations for the regulation of crypto assets.

The FSOC, chaired by the Treasury Secretary, is a group of the country’s top financial regulators. It is made up of 10 voting members and five nonvoting members. The voting members include the Treasury Secretary, the Federal Reserve chairman, the Comptroller of the Currency (OCC), the chairman of the Securities and Exchange Commission (SEC), and the chairman of the Commodity Futures Trading Commission (CFTC).

Treasury Secretary Janet Yellen described at the FSOC meeting Monday that the report “identifies a number of material gaps in current regulation, and recommendations to address these gaps.”

Firstly, the council recommends that member agencies should consider general principles when dealing with crypto assets, such as “same activity, same risk, same regulatory outcome” and “technological neutrality.” Regulators should also “continue to enforce existing rules and regulations” and “coordinate with each other in the supervision of crypto-asset entities.”

Another recommendation states:

The Council recommends that Congress pass legislation that provides for explicit rulemaking authority for federal financial regulators over the spot market for crypto-assets that are not securities.

The council also urged Congress to “pass legislation that would create a comprehensive federal prudential framework for stablecoin issuers that also addresses the associated market integrity, investor and consumer protection, and payment system risks.”

Moreover, council members should “continue to build their capacity to analyze and monitor crypto-asset activities and allocate sufficient resources to do so.” The report further details:

The Council also recommends that Congress appropriate necessary resources to member agencies for supervision and regulation of crypto-asset activities.

Citing the FSOC report, Yellen noted: “Crypto-asset activities could pose risks to U.S. financial stability if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory structure.”

Federal Reserve Chairman Jerome Powell said at the FSOC meeting, “I support this report and its recommendations,” elaborating:

It is important to establish a thorough prudential framework to address the risks of digital assets. Acting now allows us to support responsible innovation while preserving financial stability.