US Treasury Warns Crypto Market Can Threaten Financial Stability

US Treasury has warned crypto market can threaten financial stability.

CityNews Nigeria reports that the Financial Stability Oversight Council (FSOC) of the United States Treasury Department has opinions on cryptocurrencies and how they can impact the US established financial system. 

The council, which was established by the Dodd-Frank Act to assist in identifying financial stability issues in the United States, claims that if the industry is left unregulated, crypto assets like stablecoins may endanger the nation’s financial system.

“Crypto-asset activities could pose risks to the stability of the U.S. financial system if their connections to the traditional financial system or their overall scale were to grow without adhering to or being paired with appropriate regulation, including enforcement of the existing regulatory structure,” the report states.

Even if related to the established system is still comparatively insignificant, the FSOC warns that future dangers could arise from choke points like stablecoins and trading platforms. 

“Although there are now only a few connections to the conventional banking system, this number has the potential to grow quickly. Participants in the traditional financial system and the ecosystem of crypto assets have investigated or developed a number of linkages. Traditional assets retained as part of stablecoin operations are notable sources of potential connections.

By offering a variety of services, such as leveraged trading and asset custody, to a variety of retail investors and traditional financial institutions, crypto-asset trading platforms may potentially have the potential for broader linkages. Customers can also access crypto-asset activities more frequently, even via some traditional money services. 

According to the council, enforcing and adhering to current regulations is a “key step” in reducing these possible threats. In order to combat the risks, the sector can provide, it also suggests strengthening the regulatory authorities’ capacity in relation to data and knowledge about crypto-assets.