U.S. Senator Elizabeth Warren (D-MA) urged Treasury Secretary Janet Yellen to spearhead the development of "a coordinated and cohesive regulatory strategy to mitigate the growing risks that cryptocurrencies pose to the financial system" in a new letter.
Dated July 26, the letter recommends that Yellen — in her "capacity as Chair of the Financial Stability Oversight Council" — "to act with urgency and use its statutory authority to address cryptocurrencies’ risks and ensure the safety and stability of our financial system."
Warren went on to write:
"I have become increasingly concerned about the dangers cryptocurrencies pose to investors, consumers, and the environment in the absence of sufficient regulation in the United States. However, as the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, the Council must determine whether these trends raise concerns beyond investor and consumer protection and extend to broader systemic vulnerabilities that could threaten financial stability."
The FSOC was created in 2010 with the passage of the Dodd-Frank financial system regulatory bill, developed in the wake of the late 2000s financial panic. In addition to the Treasury Secretary, members of the group also include the chairman of the Federal Reserve, the Comptroller of the Currency and the heads of the SEC and CFTC, among other agencies.
The letter represents what are perhaps Warren's harshest words to date on the subject of cryptocurrency. Last month, she criticized the energy consumption of cryptocurrency networks and similarly pushed for stronger federal oversight.
"Congress and federal regulators can't continue to hide out, hoping that crypto will go away. It won't. It's time to confront these issues head-on," Warren said during a hearing at the time.
In the Monday letter, Warren wrote that "FSOC should review this matter and determine whether it is appropriate to utilize its statutory authority to contain the systemic risks posed by the growing cryptocurrency market."
"The longer that the United States waits to adapt the proper regulatory regime for these assets, the more likely they will become so intertwined in our financial system that there could be potentially serious consequences if this market comes under stress."