Treasury Secretary Yellen Warns of Crypto Risk and Pushes for Regulation
Crypto is Booming
The popularity of digital assets has gotten some regulators worried. Once a footnote in the economy, traditional financial firms such as banks are increasingly getting involved. Even the Federal Reserve Bank may create its own digital currency.
Currently, about 40 million Americans have invested in cryptocurrency, 43% of which are 18-29- year-old males. Over the last five years, the market cap of digital assets has grown from $14 billion to $3 trillion.
Fraud Concerns
As the valuations grow, so do concerns about the potential for economic fallouts due to a lack of regulation and transparency. Fraud linked to cryptocurrency has cost investors millions of dollars.
Earlier this year the Justice Department made its largest ever financial seizure when it arrested a couple accused of stealing over $3.6 billion by hacking a virtual currency exchange.
Some have also expressed concern that Russia may be leaning on crypto to dodge sanctions imposed on it due to its invasion of Ukraine. However, treasury officials don’t support this theory.
Janet Yellen’s Warning
Janet Yellen warns that the uncontrolled proliferation of cryptocurrency could be a threat to the economy. The Treasury Secretary is calling for government regulation to reduce the risk to the financial system and to protect investors from fraud.
An executive order issued by President Biden calls for an evaluation of cryptocurrencies’ potential to impact financial stability and national security. He also requested the Central Bank to look into developing its own digital assets.
Yellen’s stated goal is “to support responsible innovation while managing risks”. The delicate balancing act seems to be the essence of Fed policymakers’ work.
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