US Treasury Secretary Yellen: Crypto market turmoil poses no ‘real threat’ to US financial stability

While the crisis in TerraUSD (UST) is fueling panic among crypto investors, U.S. Treasury Secretary Janet Yellen has said that crypto-assets are still only a small part of the wider financial system. The turmoil does not pose a “real threat” to the stability of the U.S. financial system.

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Yellen testified before the House Financial Services Committee on Thursday that she does not believe the crypto market has grown to a scale that poses a “systemic risk”: “I can’t say [stablecoins] have reached a point where it affects financial stability.”

Speaking at the hearing, Rep. Jim Himes (D-CT) stated that, as a witness to the 2008 financial crisis, he does not believe the $2 trillion crypto market is large enough to trigger systemic risk, given the recent crypto market crash, That figure has shrunk to $13,000.

Yellen agreed with Himes, but she declined to say what level of market capitalization would trigger risk — say $5 trillion or $6 trillion.

Following the 2008 financial crisis, Congress passed legislation recognizing that certain large financial firms, including banks and insurance companies AIG, posed “systemic risks” to the U.S. economy, and imposed a range of oversight on their business operations, including raising capital reserves.

Yellen also noted that while cryptocurrencies and stablecoins do not currently meet the systemic threshold, that could change in the future.

“I wouldn’t describe them as a real threat to financial stability, but they are growing very fast and carry the same risks that old-fashioned bank runs have had for centuries,” she said .

The hearing also discussed the collapse of the UST token, the third-largest stablecoin in the crypto market prior to this week.

Yellen noted that UST, which was supposed to be pegged to $1, has “fallen below,” acknowledging that algorithmic stablecoins such as UST (which rely on financial incentives to maintain a peg to the U.S. dollar) and other stablecoins backed by U.S. dollar reserves Essential difference.

Rep. Stephen Lynch (D-MA) also raised the issue of stablecoins, noting that there are more than 200 of them, and suggesting that issuing central bank stablecoins would help replace most of them.

Yellen noted that financial regulators are studying the feasibility of a central bank digital currency, but noted that such a currency could pose privacy risks if it allows governments to monitor people’s spending.

The U.S. Congress and the White House are pushing hard to implement new regulations on the crypto industry. As Bitot previously reported, President Biden issued an executive order in March calling for greater coordination among agencies on cryptocurrencies.

At a hearing earlier this week, Yellen called for stablecoin legislation to be passed by the end of the year, saying it was “very important, even urgent” for Congress to pass stablecoin legislation.

Panic cashing out of UST holders resulted in a sharp increase in the supply of Luna while the price plummeted. The supply of Luna increased from 1.5 billion to 32.3 billion, and the price of UST fell from $1 to $0.016. Marcus Sotiriou, a crypto analyst at digital asset brokerage GlobalBlock, told CNN: “If we see this going on for multiple days, then we’re going to start to be very worried, very worried, the impact is so big, it’s all unknowns.” .

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/us-treasury-secretary-yellen-crypto-market-turmoil-poses-no-real-threat-to-us-financial-stability/
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