US Treasury Secretary: FTX Crash Shows Weaknesses of the Entire Crypto Sector
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Answer US Treasury Secretary: FTX Crash Shows Weaknesses of the Entire Crypto Sector
US Treasury Secretary Janet Yellen shared her concerns about the implosion of cryptocurrency exchange FTX on Saturday in an interview with Bloomberg.
She stressed that the failure of FTX reinforced her view that the cryptocurrency market requires very careful regulation, stressing that it shows the weaknesses in the entire sector.
Yellen compared the cryptocurrency markets to developed financial markets with better investor protections, adding:
On other regulated exchanges, you will have segregation of clients’ assets.
The idea that you could use clients’ deposits on the stock exchange and lend them to a separate institution you control to make risky, leveraged investments – that would not be permissible.
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And she continued:
At least they are not deeply integrated with our banking sector and, at this point, do not pose broader threats to financial stability.
Yellen warned that the FTX debacle could have been worse if digital assets were more embedded in the financial system.
Federal Reserve Vice Chair Lyle Brainard similarly stressed the importance of strong regulation of cryptocurrencies in an interview with Bloomberg on Monday.
She noted that the crypto sector has proven to be subject to the same risks as traditional finance and should be subject to the same rules.
Brainard reiterated her long-held view that crypto finance needs strong regulation, adding:
It’s really worrying to see that retail investors are really getting hurt by these losses.
Despite a lot of hype…I have heard a lot about how decentralized these markets are…it turns out that they are highly centralized, highly interconnected, have a domino effect, and failures from one platform spread to another.
After FTX filed for bankruptcy, a growing number of lawmakers have called for stricter regulation of cryptocurrencies.
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Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), warned that the crypto space is highly inconsistent with regulation.
Last week, the White House and several US senators also called for the need for proper oversight of cryptocurrencies.
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