US regulators Cryptocurrencies pose risks to the country’s capital adequacy

New York City: The top authorities in the United States are suggesting a number of additional protections to guarantee that a burgeoning market for cryptocurrencies that is not regulated does not threaten the financial stability of the United States.

Stablecoins are a type of Cryptocurrency that is pegged to the price of another financial asset, such as the United States dollar or gold. Regulators have called on Congress to pass legislation that would address the systemic risks caused by the growth of stable coins. This is one of seven major recommendations that have been made by regulators.

The recent volatility in the cryptocurrency market, particularly in stablecoins, has made authorities particularly apprehensive about the need for regulation as use of the digital asset continues to expand. In particular, this has been the case for regulators in the European Union.

The Financial Stability Oversight Council held a meeting on Monday to accept the suggestions included in a 125-page report that was compiled in response to an executive order regarding digital assets that was issued by President Joe Biden in March. Additionally, the research recommends expanding the regulatory authority that government entities have over cryptocurrencies and digital assets.

The Oversight Council is an interagency committee that includes the Chairman of the Federal Reserve, Jerome Powell. Janet Yellen, the Treasury Secretary, serves as the organization’s chairperson. The Financial Stability Oversight Council was established in the aftermath of the financial crisis that occurred in 2008, and its mission is to detect risks and developing threats to the financial stability of the United States.

On Monday, Powell said that “acting now will enable us to foster responsible financial innovation while ensuring financial stability.” Powell also stated that stablecoins would need increased regulation as they become more extensively utilized by consumers.

Yellen is quoted as saying, “As we’ve painfully learned from history, innovation without sufficient regulation may result in severe disruptions and damage to the financial system.” [Citation needed]

As more people in the United States spend their money in cryptocurrencies, the Council said at the beginning of the year that it will devote its efforts to investigating and producing recommendations on problems pertaining to digital assets.

According to a survey conducted by the Pew Research Center in September 2021, around 16% of adult Americans, or 40 million individuals, have made an investment in cryptocurrencies. And 43 percent of males between the ages of 18 and 29 have invested money in cryptocurrencies.

A study was released by the Treasury Department earlier this month with a recommendation that the United States should concentrate on building a digital currency.

According to Yellen, the recommendation from the Treasury Department is for the United States to “advance policy and technical work on a prospective central bank digital currency, or CBDC,” so that the country is ready “if CBDC is decided to be in the national interest.”

Although more than one hundred central banks across the globe are contemplating the introduction of a digital currency, very few of them have actually done so.