The collapse of crypto exchange FTX is proof digital asset markets need more effective oversight, according to U.S. Treasury Secretary Janet Yellen.
“Further interconnections of the traditional financial system and crypto markets could raise broader financial stability concerns,” Yellen said in a statement on recent market developments. “Going forward, it’s vital we do what is necessary to address these concerning risks and act to protect consumers and promote financial stability.”
Yellen's statement comes after FTX filed for bankruptcy protection, sending waves through crypto markets. The troubled exchange had been valued at $32 billion at its peak in January.
Regulators should “rigorously” enforce existing rules and Congress should “move quickly” to fill regulatory gaps identified by the Biden Administration, Yellen said. Yellen’s comments come after the Biden Administration released a series of reports on digital assets earlier in the fall.
“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,” Yellen said.
Lawmakers are already taking a closer look at FTX after the exchange collapsed following a run on its utility token. The House Financial Services Committee is planning a hearing next month, and “expects” to hear from former CEO Sam Bankman-Fried, among others, Committee Chair Maxine Waters said in a statement.
Despite the turmoil in the crypto markets, spillover into the broader financial markets has been limited, Yellen said. But the Treasury secretary noted a recent warning by the Financial Stability Oversight Council, which she chairs.
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