Strong Recommendation of Crypto Regulation to the US Congress

Strong Recommendation of Crypto Regulation to the US Congress
  • FSOC Report provokes the mandatory need of crypto regulation in the US 
  • The UN forecasts a 2.5% drop in global economic growth this year.

The Biden administration and the Capitol Hill, a.k.a the US Congress, are in serious conversation to enforce a crypto regulatory framework in the United States. The report released by the Financial Stability Oversight Council (FSOC), a board of US’s leading financial regulators with the US Treasury, on Monday has urged the government to take a strong stance. 

Alongside FSOC, other regulatory bodies in the United States – Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), advocate for the mandatory need of regulation of the digital assets sector to safeguard the US financial system from further risks. 

The US FSOC strongly stated:

“Addressing digital asset risks would prevent the build-up of systemic risk and enhance the resiliency of the U.S. financial system.”

FSOC report is a compilation of all the financial stability risks and regulatory gaps that emerge from the digital assets sector. Also, it documents the plans to mitigate these financial risks and vulnerabilities from the US financial system.

Crypto Regulation Prior To Recession

2022 has infamously become the year of crypto collapse with the record of a cascade of crashes and financial crises. Parallelly, on the other hand, inflation soared up in the global macroeconomy.

The Biden Administration and the Federal Reserve executed the plan of hiking the interest rates to combat inflation in the previous months. But seemingly, this threatens the overall economic growth. As a matter of fact, the macroeconomy is exhibiting signs of global recession. 

Recently, through the “Trade and Development Report ”, the United Nations cited the possibilities of the global economy to slow down by 2.5% in 2022. Furthermore, it forecasts the growth to drop by 2.2% in 2023.  

Stablecoins, digital assets pegged to the fiat currencies, establish an interconnection between the traditional financial system and the crypto market. With collapse of the once-largest stablecoin TerraUSD in May, the US government was alarmed by the risks caused due to this interconnection. 

The regulatory body cited its belief that crypto prices are “primarily driven by speculation.” In order to preserve the resiliency of the US financial system, the regulators urge the government to take up a strong decision in adopting and regulating the crypto sector. 

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