Experts and government officials have pinpointed the dangers that come with digital assets. U.S. authorities have warned that digital assets pose a security risk in a recent study. These dangers threaten the stability of the American financial system.
The Study Contends Unless “Proper Regulation” Is Put in Place
On March 9, 2022, President Joe Biden issued an E.O. In the Order, the phrase “Ensuring Responsible Development of Digital Assets” was used. The Financial Stability Oversight Council (FSOC) has now addressed this issue. The governing body has released a 124-page report on digital assets.
In 2010, Congress and the Senate approved the Dodd-Frank Wall Street Reform and Consumer Protection Act. This created room for the establishment of FSOC. In September, the White House released a “Comprehensive Framework” for crypto regulation and development.
The head of the SEC, Gary Gensler, has shared his thoughts on the findings. He argues that many crypto exchanges are involved in securities transactions since most crypto tokens are securities. As a result, they need to file paperwork with the SEC.
Convergence Of Regulatory Authorities
In recent months, authorities in the United States have ramped up their attempts to regulate digital assets. Commodity Futures Trading Commission, The Securities and Exchange Commission, and The United States Department of the Treasury are all examples. The effects of this “regulation by enforcement” have been undesirable.
Secretary of the Treasury Janet Yellen issued a comment about the report. She said that in the previous several years, the quantity and variety of digital assets had increased substantially. She continued by saying that they had gotten a significant amount of interest and funding.
A mix of individual and institutional investors contributed to these sums and their subsequent interests. She claims that despite this, the last year, in particular, has been marked by extreme instability and shocking events. She stressed that the Council had prioritized the safeguarding of digital assets.
During their February meeting, members identified this as one of their top priorities for the year.
According to CoinGecko, the total market value of all cryptocurrencies is now $981 billion. This figure represents a decrease of $1.24 trillion. This is from the $2.2 trillion that was recorded in the same period in October 2021.
The Report Points To A Few Key Issues
The report highlights several problems, including the heightened volatility within the crypto-asset ecosystem. Inadequate safeguards against run risk and over-leverage are examples of this.
Concerns arose because of the speculative nature of the price increases rather than any actual practical applications in the economy.
Consistent, widespread decreases were also highlighted as a serious problem. The article discussed the Crypto tokens linked to companies with shady backgrounds and murky financials.
The research also highlights the dangers of centralizing essential services and vulnerabilities.