Treasury Secretary Janet Yellen Urges Congress To Quickly Enact Crypto Oversight Legislation

Key Points:

• Treasury Secretary Janet Yellen will address Congress on AI in finance, stressing the need for increased oversight.
• Yellen raises concerns about crypto risks, including stablecoins and platform vulnerabilities.

Treasury Secretary Janet Yellen is scheduled to address the U.S. House of Representatives’ Committee on Financial Services on Tuesday, expressing significant concerns about the increasing use of artificial intelligence (AI) in the financial sector.

Treasury Secretary Janet Yellen Highlights AI Concerns in Financial Sector Oversight

While acknowledging the potential for AI to enhance efficiency and reduce costs, Yellen stressed the necessity for heightened oversight by financial bodies and regulators.

Treasury Secretary Janet Yellen will emphasize before Congress the risks posed by the crypto industry to the financial system, particularly focusing on stablecoins, crypto platform runs, and price volatility.

The Financial Stability Oversight Council (FSOC), led by Yellen, has prioritized monitoring crypto risks, identifying potential hazards such as runs on crypto-asset platforms, vulnerabilities linked to price fluctuations, and non-compliance with legal standards by certain platforms.

U.S. Faces Uncertainty, EU Proposes Stricter Crypto Rules

In her testimony, Yellen called for the enforcement of existing regulations and urged Congress to pass new legislation to regulate stablecoins and the spot market for non-security cryptoassets. Despite advocating for collaborative efforts with Congress, the U.S. remains uncertain in its rule-making for these sectors.

Treasury Secretary Janet Yellen, leading the FSOC, will underscore the risks associated with crypto platforms and stablecoins during the congressional hearing, urging lawmakers to pass legislation. She previously likened FTX to the “Lehman moment” for crypto, referencing Lehman Brothers’ collapse during the 2008 financial crisis.

The FSOC’s focus on digital assets, highlighted in its 2023 annual report, contrasts with the European Securities and Markets Authority’s (ESMA) assertive regulatory approach. Under the Markets in Crypto-Assets (MiCA) regulation, the EU has proposed stricter rules for foreign crypto firms, showcasing a proactive stance in the evolving landscape.