The Financial Stability Oversight Council on Friday released its 2024 annual report that addresses various risks and areas of concern within the U.S. and global financial systems. As in previous years, the report highlighted the role of the stablecoin and digital asset sectors more broadly, but went so far as to suggest that the FSOC would take concrete steps to curb these concerns. was not reached.
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The Financial Stability Oversight Council, made up of the heads of U.S. financial institutions, warns in its annual report that the unchecked growth of stablecoins could pose a problem for the U.S. and global financial system. did.
why is it important
The Financial Stability Oversight Council is tasked with ensuring financial stability in the United States and has been pushing Congress for years to pass legislation addressing the cryptocurrency market. These concerns are reiterated in the 2024 report.
break it down
FSOC has warned in recent years that stablecoins exist outside of any federal regulatory framework and that their aggregate size could pose risks to financial stability. Friday's report reiterated the potential risks. At the same time, similar to previous FSOC reports, it called on Congress to pass legislation addressing stablecoins and market structure.
“Stablecoins continue to represent a potential risk to financial stability as they are highly vulnerable in the absence of appropriate risk management standards,” the report said. “This run risk is amplified by issues related to both market concentration and market opacity.”
The report cites Tether's USDT, which accounts for about 70% of the global stablecoin market, as one of the issues that regulators should focus on.
The lack of a federal regulatory framework of any kind is an ongoing concern as well, the report said. Some states have stablecoin frameworks, but these are insufficient for FSOC's concerns.
“Although a few companies are subject to state-level oversight that requires periodic reporting, many provide limited verifiable information about their asset and reserve management practices,” the report said. states.
FSOC has warned in recent years that it may have to take all possible action if Congress fails to act, but how much, if any, action is possible? is unknown. The FSOC will be comprised of new regulators in the coming months.
“Furthermore, many crypto asset market companies and issuers remain outside of or non-compliant with the U.S. financial regulatory framework,” the report said. “Therefore, the spot market for crypto assets remains susceptible to significant fraud and manipulation.The Council has proposed legislation that would give federal financial regulators explicit rulemaking authority over the spot market for crypto assets that are not securities. I recommend that Congress pass it.”
“We have also addressed new risks arising from significant technological changes,” Treasury Secretary Janet Yellen said in a prepared statement. “Digital assets and artificial intelligence not only bring potential benefits such as efficiency, but also financial risks, cyber risks, and risks from third-party service providers. We continue to seek legislation to create a comprehensive federal prudential framework for crypto assets that addresses the risks we have identified. ”
Wednesday
15:00 UTC (10:00 a.m. ET) The House Financial Services Committee holds a hearing on technology and finance, a swan song of sorts for outgoing chairman Patrick McHenry, R.N.C. fulfilled. (Bloomberg) Bloomberg has a list of stories it wanted its team to write, and what it really shows is that there was a lot of good journalism this year. (The Verge) South Korean President Yoon Seok-yeol declared martial law earlier this week. The situation lasted for several hours after opposition members literally climbed the fence during a large-scale protest against the levy suspension declaration.
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