The crypto currency market is rife with fraud, failures to comply with existing laws and large swings in volatility, however the recent implosion of digital currency exchange FTX hasn’t hampered the broader economic system, in accordance with a report released Friday by Treasury’s Financial Stability Oversight Committee.
“FTX is a shock to that market,” a Treasury official said, adding that the bankruptcy underscores the committee’s concern about crypto highlighted in a report it released in October.
The committee, which was created after the financial crisis to discover looming risks to the economic system, reiterated its call for Congress to pass laws that permits U.S. regulators to police spot markets for crypto assets that are not securities.
The council also said lawmakers need to deal with regulatory arbitrage, when firms reap the benefits of more favorable or lighter regulation in multiple jurisdictions to avoid tighter oversight within the U.S.
The group uses data from the Consumer Financial Protection Bureau, the Federal Trade Commission and the Securities and Exchange Commission, amongst other agencies, to highlight fraud in crypto. Of 8,300 crypto complaints received by the CFPB’s Consumer Grievance Database between October 2018 and September 2022, 40% seemed to be a “fraud or scam.”
Over 46,000 people lost greater than $1 billion on crypto trading to scams and fraud between Jan. 1, 2021 through March 31, in accordance with the FTC.
Since fiscal yr 2019, the SEC has received over 23,000 suggestions, complaints and referrals involving the crypto markets.
But while FTX’s failure “precipitated price decreases in Bitcoin and other crypto-assets,” there was “limited impact on the broader U.S. economic system” as a result of the present regulatory framework, in accordance with the report.
The committee warned that this might rapidly change if participants within the crypto and traditional financial systems proceed to plot ways to overlap, due to this fact increasing the urgency for more regulatory oversight.
Traditional banks, for example, hold stablecoin as a part of their reserve assets, retail investors are increasingly using leverage to trade crypto currencies and crypto has also develop into more widely available through some traditional financial service firms. Stablecoin is taken into account to be a less dangerous kind of crypto currency since it seeks to scale back price volatility by deriving its value from a set traditional currency or commodity, just like the U.S. dollar or gold.
“Such interconnections would broaden the consequences of shocks that originate contained in the digital asset ecosystem,” the report states.
