With the cryptocurrency market still reeling from the FTX fiasco, it is not surprising that crypto regulation has become a very important topic these days.
Last Wednesday, Janet Yellen, the Secretary of the US Treasury, stated that thankfully, the crypto market’s turmoil had not had any impact on the banking sector.
However, she expressed her skepticism about the industry and stressed that it requires adequate regulation.
The New York Times DealBook was hosting the event where the US Treasury Secretary spoke about cryptocurrencies.
She said that adequate consumer protections need to be in a place where crypto assets are concerned. She stated that she had been skeptical before and remained the same now.
She did assert that financial innovations should be welcomed and encouraged, especially if they can help in boosting financial inclusion and cut down the costs of cross-border transactions.
However, she added that the recent developments were certainly not about any of these factors. She said that everything that had occurred in the last few weeks and even before that indicated something else.
According to her, it highlights just how important it is to have adequate regulation in place since it is obvious that there is currently no regulation in the industry.
On November 11th, the crypto market saw its biggest shakeup when the crypto exchange known as FTX filed for bankruptcy in Delaware.
Since then, it has come to light that the now-defunct crypto exchange owes about $3.1 billion to its biggest 50 creditors.
The blowup of one of the leading crypto exchanges has resulted in losses worth billions of dollars for about a million customers as well as other investors.
Yellen disclosed at the event that the US was engaged in discussions with its allies on the topic of crypto regulation.
She also said that a number of reports had also been compiled by the Treasury Department that highlighted the ‘significant’ concerns associated with it.
She said that one of their top priority was to ensure that customer assets are protected and that these assets are kept segregated because it can help in preventing the problems that had been brought to light in FTX’s disaster.
According to Yellen, the crypto crisis is the sector’s ‘Lehman moment’, which is a reference to the bankruptcy of the investment bank Lehman Brothers back in 2008.
This resulted in a massive downturn for the stock market and the US government had to step in to bail out the financial players with $700 billion.
Yellen added that the banking sector had remained safe from the crisis in the crypto market and that was a relief. She also said that it was because banking regulators have exercised caution where crypto is concerned.
She said that the Lehman moment for crypto has been quite harmful because the market has gotten quite big.
All of this indicates that crypto regulation has now become extremely important and numerous proposals have already been submitted on the matter.
The latest to propose regulation was the New York Department of Financial Services (NYDFS), which wants to charge crypto companies based in New York for the costs incurred in their supervision.
The New York State Senate had given NYDFS the authority of charging the crypto companies under its supervision eight months earlier.
This would bring crypto companies in line with how traditional financial services companies and banks are overseen by the regulator.
However, these assessments will only be applicable to crypto companies that have been granted a BitLicense, which is issued by the NYDFS.
There are currently 22 companies that have been given the said license.