The White House is looking at ways to reduce the risks that affect digital assets without stifling innovation in the sector, a different stance from China, which imposed a blanket ban on the asset class more than a year ago. In a blog post published Friday, the administration cited the impact of recent market blowups and the losses suffered by investors.
‘‘2022 was a tough year for cryptocurrencies. In May, a so-called ‘stablecoin’ imploded, prompting a wave of insolvencies. Just months later, a major cryptocurrency exchange collapsed,’’ the announcement noted, referring to Terra Luna and FTX. It added that the ‘‘turmoil in the cryptocurrency markets has had a little negative impact on the broader financial systems.’’
Moving forward, the US is keen to ensure that the volatility in the crypto space does not spill to the traditional financial sector. The announcement said that such an approach works to protect investors and weed out bad actors. According to the post, crypto firms are ignoring the relevant financial controls and basic risk controls, while others are committing outright crimes.
The Role of the Banking Agencies and Congress in Supporting Crypto Regulations
Biden’s government lauded the steps taken by industry agencies, including those in the banking sector who have doubled their efforts to create public awareness about the dynamics of digital assets.
In light of the same, Congress has been urged to increase its efforts in preventing the misuse of clients’ funds. In particular, the traditional financial players, including the pension funds, should be restricted through legislation to prevent them from risking customer funds in volatile assets, according to the report published by White House correspondents Brian Deese, Arati Prabhakar, Cecilia Rouse, and Jake Sullivan.
At the same time, the US government is keen to ensure that such intervention does not stifle innovation. Two years into office, Biden’s regime views cryptocurrencies as an alternative to a cheaper, faster, and safer financial system if done correctly.
