In addition to highlighting the risks associated with cryptocurrencies, Yellen is also expected to address a measure to repeal a staff bulletin issued by the SEC.
In a testimony set to be delivered to Congress on February 6, 2024, US Treasury Secretary Janet Yellen will express significant concerns regarding the potential risks associated with the cryptocurrency industry.
Yellen’s remarks are expected to highlight the dangers associated with stablecoins, a type of digital asset pegged 1:1 to the value of a reserve asset such as the US dollar. The treasury secretary is also anticipated to discuss the possibility of runs on crypto platforms and the inherent volatility associated with the asset class.
US Treasury Secretary to Address the Congress
Yellen is scheduled to address the House Financial Services Committee, where she will discuss the latest findings of the Financial Stability Oversight Council (FSOC), a group of federal financial regulators chaired by the Treasury Secretary.
The FSOC has been closely monitoring the risks posed by digital assets in recent years, placing them among the top categories of concern along with artificial intelligence.
According to prepared testimony released ahead of the hearing, Yellen will emphasize the need for regulatory oversight and legislative measures to address the challenges posed by the digital asset industry.
She will also stress the importance of enforcing existing regulations and call on Congress to pass legislation aimed at regulating stablecoins and the spot market for cryptocurrencies that are not classified as securities.
“Applicable rules and regulations should be enforced, and Congress should pass legislation to regulate stablecoins and the spot market for crypto-assets that are not securities. We look forward to continuing to engage with Congress on this,” reads the document.
US Criticized for Lack of Crypto Regulation
In addition to highlighting the risks associated with cryptocurrencies, Yellen is also expected to address a measure to repeal a staff bulletin issued by the Securities and Exchange Commission (SEC). The bulletin named SAB 121, which requires firms that custody digital assets to record customer holdings as liabilities on their balance sheets, was issued two years ago in March 2022.
However, it has faced criticism from the Blockchain Association, a group of crypto proponents in the United States, for its perceived inconsistency and lack of clarity.
Legislators, including Senators Cynthia Lummis and Representatives Mike Flood and Wiley Nickel, have introduced a joint resolution to block the SEC bulletin, highlighting the contentious nature of crypto regulation in the US.
Meanwhile, Yellen’s testimony comes amid growing regulatory scrutiny of the emerging economy in the United States. While other jurisdictions, such as the European Union and Asia, have taken decisive steps to establish regulatory frameworks for digital assets, the US has been grappling with regulatory uncertainty.
Countries such as Hong Kong have established a clear framework for regulating the crypto industry in the region. In May 2023, the Asian nation started accepting licensed crypto exchanges to enter the country and explore its crypto market.
In contrast to the proactive approach taken by other countries, the US has been criticized for its lack of clarity and progress in addressing the risks associated with cryptocurrencies.