The regulation of digital assets in the United States has been a topic of concern for regulators, lawmakers, and investors.
In its annual report released on Friday, the US Financial Stability Oversight Council (FSOC) highlighted the requirement for crypto regulation. The FSOC is a council formed by Title I of the Dodd–Frank Wall Street Reform and Consumer Protection Act, charged with monitoring the financial system and its stability.
The organization in its report, has called on lawmakers to pass appropriate legislation addressing regulatory gaps for crypto-related activities. It urges the members of Congress to pass legislation providing “explicit rulemaking authority for federal regulators over the spot market for crypto-assets.” The report notes that tokens previously identified as securities would be exempted.
It also highlighted the lack of a comprehensive regulatory framework especially addressing stablecoins and visibility and supervision of the crypto firms in the US.
The regulatory agency cited the recent collapse of FTX as part of its background information in making recommendations for the actions required on digital assets. It also assessed the effect of the FTX fiasco on the price of cryptocurrencies and the larger US financial market.
According to the FSOC report, issues at FTX had “precipitated price decrease in Bitcoin and other crypto-assets” but “had a limited impact on the broader US financial system.”
Gary Gensler, Chairperson of the Securities and Exchange Commission (SEC), a popular figure in relevance to regulations in the US, opined on the regulatory agency’s report. He said:
“Risks from this speculative, volatile, and what I believe is a largely non-compliant market put investors at risk.”
While highlighting the risks to investors, he also pointed out the importance of compliance with intermediaries and issuers of security tokens. He also said that, as of now, the threats from the crypto sector hadn’t impacted the traditional financial industry, but the regulators must be cautious in the coming times.
“While the risks from the crypto markets generally do not appear to have spread to the traditional financial sector, we must remain vigilant to guard against that possibility.”
The regulator’s annual report reiterates what it said in October this year. The council released its assessment in accordance with US president Joe Biden’s executive order on crypto.
On December 8, the United States Office of the Comptroller of the Currency (OCC) warned banks about the “emerging risks” in the cryptocurrency sector. The regulator also said that the sector should maintain a “cautious approach” and seek permission when engaging with crypto or crypto firms in relevant cases.
Currently, the two authoritarian bodies in the US are strife with regulating the crypto sector. The Commodity Futures Trading Commission (CFTC) and the SEC have argued in favor of their respective agencies leading the regulation of digital assets in the United States.
The report did not comment on which body should be a better fit to assume the responsibility upon the order from Congress. However, there has been speculation regarding the lawmakers desiring CFTC to take charge of the crypto regulations as Todayq News reported in August that three proposals have already been presented in Congress this year to make the CFTC the primary regulator for cryptocurrency spot markets.
In July, the US Treasury Department uploaded a fact sheet explaining the collaboration with foreign regulators and how they will do it. This is all done in an effort to curtail the wrongdoings in the crypto industry.
The US will also encourage adopting and implementing international guidelines through regional and bilateral arrangements. The administration will also seek to limit duplication, encourage work maintained within its primary stakeholders, and ensure coordination.