US Treasury Secretary Janet Yellen Says Crypto Markets Need More ‘Effective Oversight’ Following FTX Implosion
As the collapse of major exchange FTX continues to fuel a bearish mood throughout the cryptosphere, US Treasury Secretary Janet Yellen has called for the introduction of tighter regulations for the crypto industry.
“The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets,” the official said in a statement.
Yellen said that her agency and other U.S. regulators had identified a number of risks within the crypto markets over the past year, and these observations were included in the reports released under the auspices of the US President’s Working Group on Financial Markets.
“Some of the risks we identified in these reports, including commingling of customer assets, lack of transparency, and conflicts of interest, were at the center of the crypto market stresses observed over the past week,” said Yellen, who served as the chair of the Federal Reserve (FED), the country's central bank, in the years 2014 to 2018.
“We have very strong investor and consumer protection laws for most of our financial products and markets that are designed to address these risks,” the secretary said. “Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services.”
The official concludes that the government, including Congress, must “move quickly to fill the regulatory gaps” even though, in “terms of financial stability, spillovers from the events in crypto markets have been limited”.
In the aftermath of FTX’s collapse, some market observers are concerned about the risk of a potential broader contagion spreading across the crypto ecosystem. However, there is also hope that some major players could benefit from the ongoing downturn to push for more market consolidation, according to Joseph Ayoub, an analyst at international financial industry player Citi.
“I think it’s a double-edged sword,” Ayoub said in a recent interview. “I think that, firstly, you obviously have the issue that volumes and interest and volatility are going to get down in the space, which is clearly a massive negative for a lot of these companies that are operating in cryptocurrency.”
At the same time, the ongoing market woes “also provide opportunity for other exchanges to potentially take a larger share of the market as the second-largest derivatives and spot exchange has filed for Chapter 11,” the analyst said.
“Within cryptocurrency, it is unclear as to how far and how deep this goes. Contagion can last for a significant amount of time,” he concluded.