U.S. Treasury Secretary Janet Yellen has called for “additional regulation” to protect consumers and investors from the “inherent” risks present in the cryptocurrency industry. Speaking on CNBC’s Squawk Box, Yellen said that the Treasury Department had conducted in-depth reviews of the sector in recent months under the President’s Executive Order and had identified a number of risks for consumers and investors.
Current regulatory system has limitations
According to Yellen, some of those risks can be managed by the U.S. regulatory system, as current laws provide sufficient oversight and supervisory authorities like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have the necessary “tools” to tackle them. However, she added that there are “holes in the system” that need to be addressed via new rules. Yellen did not elaborate on which areas could be improved and what shape these new rules could take but said that she would like to work with Congress to see additional regulation introduced.
SEC action against Coinbase and Binance
Yellen was also asked to speak about the recent SEC action against two of the biggest cryptocurrency exchanges, Binance and Coinbase, over violations of securities laws. However, she refrained from commenting on the “individual cases the SEC is looking at” but added that she considers such actions by supervisory agencies to be “appropriate.” She said that she is “very supportive” of seeing those agencies use the tools they have.
Regulatory clarity needed for the crypto industry to thrive
The crypto industry and the U.S. regulatory system are currently at an impasse, which 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 U.S. by jumping through all the necessary regulatory hoops, and its claims that most major cryptocurrencies are de facto securities under current laws paint a bleak future for the industry in the country. However, these cases will ultimately result in the regulatory clarity that the industry so desperately needs to thrive in the U.S.
Despite the SEC claiming multiple times that current securities laws are sufficient to regulate the industry, there are publicly documented inconsistencies among regulators’ stance toward different cryptocurrencies. It took years for regulators to contend with the enigma of Bitcoin and where it fits in the regulatory regime, with most regulators eventually admitting that 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 not listed Ethereum as a security in its cases against Binance and Coinbase so far, but other top 10 projects like Polygon and Cardano have been deemed as such.
Yellen’s call for additional regulation to protect consumers and investors in the crypto industry highlights the need for more regulatory clarity from U.S. authorities. While current laws provide some oversight, new rules are needed to address the “holes in the system” and ensure a fair and transparent marketplace for all. The SEC’s recent actions against Coinbase and Binance may be a cause for concern for the industry, but they also represent an opportunity for the regulatory clarity that will ultimately help the industry to thrive.
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