Elizabeth Warren, the Democratic Senator from Massachusetts, has put forth a statement asking Janey Yellen, the current Treasury Secretary, to consider beginning to regulate cryptocurrencies.
In a letter to Yellen, who is currently the chair of the Financial Stability Oversight Council, Warren stated that the current rising popularity of cryptocurrencies, which are currently not controlled in any way by any central bank or other monetary authority, demands federal regulation.
The letter from the lawmaker states:
I have become increasingly concerned about the dangers cryptocurrencies pose to investors, consumers, and the environment in the absence of sufficient regulation in the United States. However, as the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, the Council must determine whether these trends raise concerns beyond investor and consumer protection and extend to broader systemic vulnerabilities that could threaten financial stability.
The letter from the lawmaker continued:
These examples demonstrate the extent to which cryptocurrencies currently touch or can ripple through nearly every corner of the financial system. As such, it is essential that the policy response to the risks posed by these assets is coordinated and holistic, rather than fragmented amongst individual financial agencies…
FSOC should review this matter and determine whether it is appropriate to utilize its statutory authority to contain the systemic risks posed by the growing cryptocurrency market. The longer that the United States waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that there could be potentially serious consequences if this market comes under stress.
Looking past those that are part of Old Uncle Joe’s administration, a group of policymakers in the Federal Reserve currently have their eye on the ever-growing cryptocurrency market.
As part of a congressional hearing held two weeks ago, Fed Chair Jerome Powell stated that the central bank has been thinking on and playing with the idea of creating a “digital dollar” that would seek to replace all cryptocurrencies and stablecoins, which are entirely digital assets that seek to peg themselves to another known asset such as gold or the U.S. dollar.
Digital currencies for the Central bank are currently in various stages of their development or implementation in nations such as China, Ecuador, Thailand, and Saudi Arabia. CBDCs attempt to mimic cryptocurrencies, such as bitcoin, ethereum, and dogecoin, through their use of secure blockchain technology, which has the potential added benefits of stability and widespread acceptance. Users of CBDCs, however, could lose the benefits of the decentralization currently offered by most cryptocurrencies.