US Treasury Secretary Janet has called for oversight of the crypto ecosystem amidst growing hype.
By Godfrey Benjamin
Edited by Marco T. Lanz
Updated
3 mins read
The world of finance is shifting toward a digital revolution, but US Treasury Secretary Janet Yellen is urging caution about the impact. Speaking at an event on Friday, Yellen mentioned that the US financial system is grappling with the risks posed by crypto assets and other digital innovations.
She painted a picture of a financial landscape packed with potential but shadowed by vulnerabilities that could undermine its stability.
In 2024, the broader US economy seems stable, with lower inflation and low unemployment. However, beneath this stability lurk two looming threats, including crypto and a shaky commercial real estate sector.
Yellen’s warning comes as crypto assets have evolved from niche investments into billion-dollar markets. Yet, digital assets remain a double-edged sword despite their prospects in the financial market.
For instance, digital assets like stablecoins pegged to the US dollar, offer faster payments and seamless cross-border transactions. The Treasury Secretary warned that their potential to destabilize traditional financial systems cannot be ignored.
She said that stablecoins could act as a financial wildcard without a clear regulatory framework. Based on this, she stated they can create cracks in an already fragile global system.
Yellen emphasized the council’s push for federal legislation to regulate stablecoin issuers. Her message to lawmakers is clear: oversight must match innovation if the US hopes to lead in the digital financial race.
Beyond cryptocurrencies, Yellen’s concerns extend to artificial intelligence (AI). AI is a powerful technology that reshapes finance through tools like algorithmic trading and risk assessments. However, she confirmed that AI use comes with significant risks.
The Financial Stability Oversight Council (FSOC), led by Yellen, recently warned that opaque AI systems could worsen biases and discrimination, especially in lending.
Meanwhile, AI might increase risks in crypto markets by automating difficult-to-understand or control decisions. In June, Bitget Research’s report revealed that crypto investors hold the risk of losing $25 billion in 2024 to deepfake scams and AI risks.
Yellen’s vision is one of balance: foster innovation while containing its risks. To achieve this, she advocated for greater inter-agency expertise to monitor and address these issues before they spiral out of control.
Yellen’s message comes as the Biden administration ends its term, leaving financial oversight tasks for the next administration. She calls for clear crypto laws, warning that the lack of regulation leaves the US vulnerable to a volatile digital market.
From Decentralized Finance (DeFi) platforms to rogue crypto exchanges, the risks are growing faster than the rules can keep up. These risks span heightened fraud and scams, cryptosecurity threats, money laundering and illicit activities, and systemic risk.
As Yellen steps away from her role, she leaves behind a roadmap for the future of financial regulation. Her legacy will likely hinge on how the US balances digital innovation with financial stability.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.
