– U.S. Treasury Secretary Yellen believes that the $2 trillion cryptocurrency market cap does not pose a systemic risk.
– Yellen also spoke about the recent collapse of the Terra stablecoin UST.
U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday that she doesn’t think the cryptocurrency market has grown enough to pose a “systemic risk” — a risk that could trigger a flurry of new regulation measure.
Yellen made the remarks while appearing before the House Committee on Financial Services, where members pressured her on macroeconomic issues, while also repeatedly bringing up the topic of stablecoins and the current crypto market crash.
“I can’t say that the scale of (stablecoins) has reached a point where it makes people worry about financial stability.” Yellen gave her opinion.
Her point was made in response to a question from Rep. Jim Himes (D-CT). The latter pointed out that he experienced the 2008 financial crisis, and he also does not believe that the $2 trillion crypto market is large enough to cause systemic risk. Himes added that the $2 trillion figure is now much lower given the recent collapse in the crypto market. As of press time, CoinMarketCap data shows that the current market value of cryptocurrencies is about $1.3 trillion.
While Yellen agreed with Himes that a market cap of $2 trillion was not enough to trigger a systemic risk determination, she declined to say to what extent — say $5 trillion or $6 trillion — would be identified for systemic risk.
Following the 2008 financial crisis, Congress introduced legislation that identified certain large financial entities, including banks and insurance companies AIG, as posing “systemic risks” to the U.S. economy and imposed a range of regulatory measures on their business operations, including increased capital reserve.
Yellen also noted that while cryptocurrencies and stablecoins do not currently meet the systemic risk threshold, that could change in the future.
“I wouldn’t (yet) describe it as a real threat to financial stability, but they’re growing very fast and presenting the kind of risk we’ve known from bank runs for centuries,” she said.
The hearing also discussed the recent collapse of the Terra USD (UST) token, a stablecoin that was the third-largest stablecoin in the crypto market until this week.
Yellen pointed out that UST was supposed to be pegged to $1 (CoinMarketCap data shows that UST is currently trading at $0.1695, down 72.83% in 24 hours), but it has “fallen below $1”, while the largest stablecoin Tether ( USDT) also briefly fell below $1 on Thursday morning. Data shows that Tether once fell to 95 cents, but has now recovered to $1.
In response to a question from Rep. Himes, the Treasury secretary also said she is aware of the difference between algorithmic stablecoins such as UST and other stablecoins backed by dollar reserves. Algorithmic stablecoins such as UST rely on fiscal incentives to remain pegged to the U.S. dollar, while other stablecoins are backed by U.S. dollar reserves.
Rep. Stephen Lynch (D-MA) also raised the issue of stablecoins, noting that there are more than 200 stablecoins in the crypto market, and saying that issuing a central bank stablecoin, known as a central bank digital currency, would help eliminate most stablecoins currency.
Yellen noted that financial regulators are studying the feasibility of a central bank digital currency, but she noted that such a currency could pose privacy risks if it allowed governments to monitor people’s spending.
During Thursday’s hearing, the issue of stablecoins reflected a strong push by Congress and the White House to impose new regulations on the crypto industry. In March, President Biden issued an executive order calling for greater coordination among agencies on cryptocurrencies, and there are several bills in Congress aimed at providing clearer rules for the industry.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/u-s-treasury-secretary-yellen-says-currently-cryptocurrencies-will-not-pose-systemic-risks-to-the-financial-system/
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