Do they pose a risk to financial stability?

The independent US federal agency Commodity Futures Trading Commission (CFTC) has a keen interest in crypto regulation. Ahead of the 2022 crypto forum, a commissioner from the agency made statements about of sector. Commissioner Christy Goldsmith Romero spoke about the risk cryptocurrencies pose to the global economy.

Cryptos bring new risks to financial stability

The CFTC has published public statement and remarks by Commissioner Christy Goldsmith Romero, October 26. According to Christy Goldsmith, one word should guide the federal government’s approach to crypto“. “This word is dangerous“, she added. The commissioner has pointed out that cryptocurrencies face the same challenges as the traditional financial system. They have not managed to overcome the shortcomings of this system. However, they were made for it, she noted.

Detailed words of the manager

She said: “Unregulated crypto markets have revealed vulnerabilities to financial stability risks similar to traditional finance,with parallel themes to those of the 2008 financial crisis“. “The risk to financial stability will increase and may rise to the level of systemic risk“, she explained.

In addition, Christy Goldsmith believes that the new asset class brings new risks. There they are the anonymity that allows terrorists and criminals to use cryptocurrencies to launder money. The asset class is also used to finance illegal activities and circumvent sanctions. It is also associated with a risk of fraud, deception and manipulation of investors.

Addressing financial stability risks now

The US government should not wait for cryptocurrencies or markets to reach the level of systemic risk to address financial stability risks. Similar to post-crisis reforms, Congress could address risks to financial stability by giving additional powers to the CFTCsaid the commissioner.

it calls for the implementation of effective and strong safeguards to reduce crypto risks in the economy. She suggested that the United States should take time to establish an effective and sustainable regulatory framework, without rushing. This, while the national debate on the regulation of the sector intensifies and that more and more stakeholders in the value chain demand the adoption of a clear regulatory framework.

CFTC Commissioner Christy Goldsmith Romero believes that a thorough assessment of the risk of for cryptos it is not done yet. She urged the authorities to do so in order to establish a regulatory framework customized. Finally, she added that financial stability can be strengthened by applying “post-crisis reforms that previously worked to keep US markets the strongest and safest in the world“.

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Avatar Luc Jose Adjinacou
Luc Jose Adjinacou

No less than it dampened my enthusiasm, an unsuccessful investment in a cryptocurrency in 2017 only increased my enthusiasm. Therefore I decided to study and understand the blockchain and its many uses and transmit with my pen information about this ecosystem.

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