A growing number of leaders in Washington is demanding action after the crypto exchange FTX collapsed in spectacular fashion in just a week’s time.
Now it appears that US Treasury Secretary, Janet Yellen, has also joined the mix, as she stated on Wednesday that the collapse showed that the crypto market requires more effective oversight.
In Wednesday’s statement, Yellen said that the Treasury Department had generated reports in response to the executive order issued by President Joe Biden back in September on digital assets.
According to her, their reports had highlighted a number of risks that had now become evident with the downfall of the FTX exchange and its bankruptcy.
She essentially implied that they could have prevented this calamity if a policy had been introduced after the reports.
Yellen said that the weaknesses of the crypto market that had come to light in the previous week, such as lack of transparency, comingling of customer funds, and conflicts of interest, had been identified in the reports.
However, even after the reports, a comprehensive regulatory framework has yet to be developed for bringing crypto under the umbrella of federal regulation.
The regulatory authorities, such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have not come up with specific guidance for crypto exchanges and companies.
But, this has not stopped these financial regulators from pursuing enforcement actions against some of them.
As for lawmakers, they are currently thinking about legislation that could provide clarity in terms of regulation to the crypto sector, but there has been no voting on any such bill.
Once the FTX exchange unraveled, along with its sister entity Alameda Research, there has been a newfound urgency in Washington to ensure oversight of the crypto market.
FTX was valued at a whopping $32 billion by private investors and its downfall has had a devastating impact on millions of customers as well as other companies in the crypto space.
This has given officials in Washington and regulatory bodies the ammunition they need for targeting the crypto industry.
It seems that the Treasury Secretary not only wanted to urge regulatory bodies like the SEC into action but also wanted lawmakers to be more active in this regard.
Yellen said that the Biden administration had identified the regulatory gaps that exist, so the federal government as well as the Congress should take immediate action to eliminate them.
However, she also blamed the regulatory bodies, as they had not made use of the existing laws for preventing the turmoil from taking place now.
She stated that the consumer and investor protection laws in the US are quite strong and are aimed at addressing similar risks.
Yellen added that the regulations should be enforced where they are applicable to ensure that crypto services and assets carry the same level of protection.
She warned that lack of crypto regulation, whether by developing a new framework or leveraging an existing one, would have a devastating impact in the long run.