U.S. Treasury Secretary Janet Yellen and Federal Reserve Vice Chair Lael Brainard have stressed the need for strong crypto regulation. Yellen said the FTX collapse shows “the weaknesses” of the entire crypto sector while Brainard cautioned that failures from one platform are “spilling over into elsewhere.”
Yellen: Crypto Needs ‘Very Careful Regulation’
US Treasury Secretary Janet Yellen shared her concerns about the implosion of cryptocurrency exchange FTX on Saturday in an interview with Bloomberg. She stressed that the failure of FTX reinforces her view that the crypto market needs “very careful regulation”, stressing that “it shows the weaknesses of this whole sector.”
Yellen compared crypto markets to developed financial markets with better investor protection rules, adding:
In other regulated exchanges, you will have segregation of client assets. The notion that you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to make leveraged, risky investments – would not be something that is permitted.
“At least it’s not deeply integrated with our banking sector and, at this point, doesn’t pose broader threats to financial stability,” she continued, warning that the FTX debacle could have been worse if digital assets were more embedded in the financial system.
Fed Vice Chairman: Crypto Needs ‘Strong Regulatory Guardrails’
Federal Reserve Vice Chair Lael Brainard stressed the importance of strong crypto regulation in an interview with Bloomberg on Monday.
She noted that the crypto sector has proven to be susceptible to the same risks as traditional finance and should be subject to the same rules. Reiterating her long-held view that crypto finance needs strong regulation, Brainard opined:
It is really worrying to see that retail investors are actually getting hurt by these losses.
The Federal Reserve vice chair added: “Despite a lot of hype … you heard a lot about how decentralized these markets are … it turns out they are highly concentrated, highly interconnected, you are just seeing a domino effect, failures from one platform spilling over into elsewhere.” She concluded:
This reinforces what I think is the need to ensure that crypto finance, as it is no different from traditional finance in the risks it exposes, needs to be under regulatory perimeters…strong regulatory guardrails need to be.
Following the bankruptcy filing of FTX, a growing number of lawmakers are calling for stricter crypto regulation. The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has warned that the crypto field is “significantly non-compliant.” Last week, the White House and several U.S. senators also called for proper crypto oversight.
