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The Biden administration has posted an official blog detailing its roadmap for mitigating cryptocurrency risks.
The roadmap begins by citing the 2022 LUNA/Terra boom and the ensuing catastrophic contagion in the industry leading to multiple bankruptcies. Included in this reference is the bankruptcy of FTX, which says that, “Many everyday investors who trust cryptocurrency companies—including young people and people of color—have suffered serious losses, but, thankfully, the turmoil in cryptocurrency markets has had little impact. on the wider financial system to date.”
According to the roadmap, the Administration’s focus is on ensuring that cryptocurrencies cannot undermine financial stability, protect investors and hold bad actors to account. To achieve this, the roadmap states that experts across the administration have devised a framework for developing digital assets in a safe and responsible manner while addressing the risks they entail.
“At the direction of President Biden, we have spent the past year identifying cryptocurrency risks and acting to mitigate them using the authority vested in the Executive Branch,” the roadmap reads.
It then explains how some cryptocurrency entities ignore financial regulations and risk practices. It is also alleged that cryptocurrency platforms and promoters often mislead consumers, have conflicts of interest, fail to make adequate disclosures or commit outright fraud.
“Agencies use their authority to increase enforcement where necessary and issue new guidance where necessary,” the post read. “Banking agencies issued joint guidance this month on the need to segregate risky digital assets from the banking system. Cross-government agencies have launched — or are developing — public awareness programs to help consumers understand the risks of buying cryptocurrency.”
However, this is not enough considering last year’s events, according to the roadmap. Therefore, the Administration will disclose a priority for further research devoted to digital assets and development, “which will help the technologies that power cryptocurrencies protect consumers by default.”
The post also detailed the Administration’s belief that Congress needs to step up efforts by expanding regulatory powers, strengthening transparency and disclosure requirements, funding building greater law enforcement capacity and limiting cryptocurrency risks to the financial system. It should be noted with caution that Congress should not give the green light to mainstream institutions such as pension funds to venture directly into the cryptocurrency market as this would deepen the links between cryptocurrencies and the wider financial system and increase systemic risk.
The roadmap is the latest with respect to Bitcoin regulation from Washington, with the Biden Administration having released its “Executive Order to Ensure the Responsible Development of Digital Assets,” in March 2022 and “Climatic and Energy Implications of Crypto Assets in the United States,” report respectively. respectively in September 2022.
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