The White House urges Congress to “Step Up Its Efforts” on Cryptocurrency Regulation
In a statement issued on Friday, four senior U.S. officials from the Biden administration urged Congress to “step up its efforts” to control the cryptocurrency industry.
The officials, which include National Security Advisor Jake Sullivan, Cecilia Rouse, Director of the National Economic Council Brian Deese, Director of the White House Office of Technology and Science Policy Arati Prabhakar, and Chair of the Council of Economic Advisors Cecilia Rouse, wrote that Congress should expand authorities’ powers to prevent misuses of customers assets… and to mitigate conflicts of interest. In the statement, Congress was also advised to enhance disclosure and transparency standards for cryptocurrency businesses, stiffen fines for violating laws governing illicit money, and interact more closely with foreign law enforcement partners.
Additionally, to leap headfirst into cryptocurrency markets while formulating new crypto regulations, the authorities recommended against Congress greenlighting mainstream institutions, such as pension funds.
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It would be a major blunder that deepens connections between cryptocurrencies and the larger financial system, the authorities cautioned.
Even though neither the spectacular failures of the disastrous LUNA stablecoin nor the now-defunct cryptocurrency exchange FTX was explicitly named in the statement, the effects of both figured prominently over the officials’ advice 2022 as a tough year for cryptocurrencies plagued by the implosion of a so-called virtual currency prompting a wave of bank failures and the subsequent collapse of a major cryptocurrency exchange.
Some cryptocurrency firms disobey relevant financial laws and fundamental risk controls… Additionally, they added, Cryptocurrency platforms frequently deceive users, have a conflict of interest, fail to provide proper disclosures or engage in open fraud.
The White House’s worries and recommendations are in line with those of other American regulators, including the Commodity Futures Trading Commission (CFTC) Council member Kristin Johnson, whom earlier this week urged Congress to start giving the CFTC more power to carry out thorough research on cryptocurrency acquisitions. However, Congress is not the only body with the power to regulate the cryptocurrency market.
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The four officials claimed in their statement that the Biden administration would be announcing priorities for digital assets research and development, which will help the systems underlying cryptocurrencies protect consumers by default in the coming months. They said that Safeguards will ensure that new technologies are secure and advantageous to all – and that the new digital economy works for the many, not just a few.
Congress must exert more effort as well. For instance, Congress ought to give regulators more authority to avoid customer asset misuse, which harms investors and skews pricing, as well as to reduce conflicts of interest. Congress can also tighten the disclosure and transparency rules for cryptocurrency businesses so that investors can make more educated choices about the dangers to their money and the environment. It might increase the severity of the penalties for breaking the laws governing illicit financing and forbid bitcoin intermediaries from informing on offenders to aid law enforcement. It might provide more funding for improving the capacity for law enforcement, including with partners internationally. Additionally, it might reduce the risks posed by cryptocurrencies to the financial system by taking the actions recommended in the Financial Stability Oversight Council’s most recent report, which includes addressing the dangers posed by stablecoins.
Congress might make our work tougher and raise risks to investors and the financial system, even while the action in these areas would be welcome. Legislation shouldn’t permit to established organizations like pension funds to forge ahead in the bitcoin markets. Since last year, the volatility in cryptocurrencies has not spread to the larger financial system due to traditional financial institutions’ low exposure to them. Adopting legislation that changes course and tightens linkages between cryptocurrencies and the larger financial system would be a major error.
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The Administration fully endorses responsible technological advancements that reduce cost, increase speed, increase safety, and increase the accessibility of financial services. But to enjoy these advantages, new technologies require equivalent security measures. Protections will guarantee that new technologies are safe and helpful to everyone, ensuring that the new digital economy benefits everyone, not just a select few. We will continue to advance the digital assets framework we have created and collaborate with Congress to accomplish these objectives to put the proper safeguards in place.
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