Janet Yellen, U.S. Secretary of the Treasury, affirmed the need to regulate the cryptocurrency sector beyond securities laws on Feb. 6.
Yellen made those remarks during a hearing before the U.S. House of Representatives Committee on Financial Services. There, she said:
“The [Treasury’s Financial Stability Oversight Council (FSOC)] is focused on digital assets and related risks … Applicable rules and regulations should be enforced, and Congress should pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities.”
Yellen identified related risks as runs on crypto-asset services and stablecoins, vulnerabilities from crypto price fluctuations, and non-compliant crypto platforms.
Her statements appear to be a partial response to a Feb. 6 letter from four Republican lawmakers who seek additional information on the FSOC.
Yellen’s statements only address the issue broadly. The letter asks more specific questions, including whether the FSOC believes that Bitcoin (BTC) and Ethereum (ETH) are not securities, and whether it believes that the Commodity Futures Trading Committee (CFTC) should have its authority expanded to spot markets for non-securities crypto assets. The letter requests a response by Feb. 20.
Lawmakers support alternative legislation
Four Republican lawmakers and House members signed the letter to Yellen: Patrick McHenry, Glenn Thompson, French Hill, and Dusty Johnson.
Those lawmakers acknowledged in their letter that the FSOC has identified a lack of regulatory oversight in certain areas, including around digital assets that are not considered securities. But although the FSOC has identified those gaps, it has “failed to facilitate an environment that ensures consumer protection and fosters digital asset innovation,” a press release from lawmakers noted.
Republican lawmakers instead advocated for legislation called the Financial Innovation and Technology Act for the 21st Century (FIT21), which aims to establish clear roles for federal regulators as well as customer protections.
Though FIT21’s authors are Republican, the bill passed out of committee with bipartisan support during a mid-2023 vote. The bill is notably supported by Coinbase CEO Brian Armstrong and The Blockchain Association.