US Treasury Secretary Janet Yellen said there is a need for “additional regulation” to ensure consumers and investors are protected from the “inherent” risks present in the crypto industry.
Yellen made the statement during an appearance on CNBC’s Squawk Box on June 7.
Holes in the system
She said the Treasury Department had conducted in-depth reviews of the crypto sector under the president’s executive order in recent months, which “identified a number of risks” for consumers and investors.
Yellen said some of these risks are manageable by the US regulatory system as current laws provide adequate oversight and supervisory authorities such as the SEC and CFTC have the necessary “tools” to address them.
However, she added that there are “holes in the system” that need to be plugged through new rules.
Yellen did not elaborate on what areas could be improved or further clarify what form these new rules might take. She said:
“We are eager to work with Congress to pass additional regulations.”
SEC action is appropriate
Yellen was also asked to speak on the recent SEC action against Binance and Coinbase – two of the largest cryptocurrency exchanges in the world – for securities law violations.
She declined to comment on the action, saying she cannot comment on the “individual cases the SEC is looking at.” However, she added that she considers such actions by regulatory bodies to be “appropriate.”
She added:
“I’m in favor, very positively, of seeing those agencies use the tools they have.”
A bleak future or regulatory clarity for the industry?
The crypto industry and the US regulatory system are now in an impasse that can only be overcome with certainty when it comes to regulation.
The SEC taking action against Coinbase — a company that conducted an IPO in the US by going through all the necessary regulatory hoops — and its claims that most major cryptocurrencies are de facto securities under current law paints a bleak future for the industry in the country.
However, these matters will ultimately result in the regulatory clarity that the industry so desperately needs to thrive in the US
US regulators have so far refused to consider new regulations for the crypto sector, with the SEC claiming on multiple occasions that current securities laws are sufficient to regulate the sector.
Despite these claims, there are publicly documented inconsistencies between regulators’ attitudes towards various cryptocurrencies. It took years for regulators to wrestle with the conundrum of Bitcoin and where it fits into the regulatory regime — with most regulators eventually admitting it was more akin to a commodity than a security.
However, the debate continues to rage when it comes to almost every other cryptocurrency. The SEC has so far not listed Ethereum as a security in its cases against Binance and Coinbase, but other top 10 projects such as Polygon and Cardano are considered as such.
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