Yellen Says Crypto Poses Risk to Financial System

During a recent meeting of the Financial Stability Oversight Council (FSOC), Treasury Secretary Janet Yellen said that the US financial system is exposed to cryptocurrency-related risks.

The FSOC is urging lawmakers to pass comprehensive legislation for cryptocurrencies in order to mitigate these risks.

As reported by U.Today, the prominent American economist called for urgent crypto regulation earlier this year.

Back then, she specifically singled out dollar-backed stablecoins, arguing that certain entities should be prevented from issuing such products.

Following the collapse of the Terra ecosystem in May 2022, Yellen said that the de-pegging of UST illustrated the risks that stablecoins could pose to financial stability.

Notably, a bipartisan stablecoin bill proposed by U.S. Sen. Kirsten Gillibrand (D-N.Y.) and Sen. Cynthia Lummis (R-Wyo.) would ban algorithmic stablecoins like UST.

In her most recent remarks, Yellen once again stressed the need for a "prudential framework" for this rapidly growing sector of the cryptocurrency market.

Back in 2022, Yellen acknowledged that crypto has also benefits, arguing that payment innovation can be "a healthy thing."

American hedge fund manager Scott Bessent, who was recently nominated to replace Yellen, is known for his pro-crypto stance. He has stated that the cryptocurrency economy is "here to stay."

"I think everything is on the table with Bitcoin. One of the most exciting things about Bitcoin is that it brings in young people and those who have not participated in markets before," Bessent said.