The need for stronger oversight of the cryptocurrency market was stressed on Wednesday by US Treasury Secretary Janet Yellen, in light of the recent collapse of the FTX cryptocurrency exchange.
“The recent collapse of a major cryptocurrency exchange and the unfortunate impact it has had on cryptocurrency asset holders and investors illustrates the need for more effective oversight of cryptocurrency markets,” Yellen said in a statement where she did not directly name the FTX exchange.
The US Treasury Secretary added that the Treasury Department and other US regulators have identified risks in the operation of the cryptocurrency market over the past year, which include “the commingling of customer assets, lack of transparency and conflicts of interest”, risks that have been “at the heart of the stresses seen in the cryptocurrency market over the past week”.
Yellen also stressed that consumer protection rules must be strictly enforced in the cryptocurrency market and added that the US federal government and Congress must move quickly to close any gaps in the regulatory framework.
According to her, although the damage is mostly limited to the cryptocurrency market, its links to the traditional financial system “could raise broader financial stability concerns”.
The US Treasury Secretary’s announcement largely echoes concerns expressed by banking regulators during a two-day hearing before a congressional committee, who said that any contagion from the FTX collapse and other turbulence in the cryptocurrency market this year has been limited for now.