FTX’s collapse highlights the need for adequate crypto regulation, says Treasury Secretary Janet Yellen
Yellen compared the recent FTX collapse to the collapse of Lehman Brothers, which filed for Chapter 11 bankruptcy in 2008 and triggered a massive stock market downturn that eventually led to a $700 billion bailout by the government.
Thu, 01 Dec 2022, 08:15 am UTC
U.S. Treasury Secretary Janet Yellen is now stressing the need for adequate regulation in the crypto industry. She pointed out that the recent collapse of FTX highlighted the digital asset industry’s lack of customer protection.
U.S. Treasury Secretary Janet Yellen aired her belief about the inadequate crypto regulation on Wednesday at an event hosted by the New York Times Dealbook. “I have been skeptical, and I remain quite skeptical,” Yellen said, according to Bitcoin.com.
The treasury secretary emphasized the significance of making sure that crypto assets have adequate customer protections but also noted that it is crucial to keep an open mind to financial innovations, especially those that may lower cross-border transaction costs and aid in increasing financial inclusion.
Yellen also spoke on the collapse of FTX, which declared bankruptcy on November 11. The collapse of the cryptocurrency exchange is expected to result in total losses for one million clients and other investors in the billions of dollars. The exchange owes more than $3 billion to its 50 largest creditors.
“I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation. And it doesn’t,” Yellen said.
The treasury secretary also disclosed that the Treasury Department has identified "significant" concerns about crypto and that the United States is discussing cryptocurrency laws with allies. She stated that one of the major concerns is making sure that customer assets are protected and segregated.
Yellen compared the recent FTX collapse to the collapse of Lehman Brothers, which filed for Chapter 11 bankruptcy in 2008 and triggered a massive stock market downturn that eventually led to a $700 billion bailout by the government. “It’s a Lehman moment within crypto, and crypto is big enough that we’ve had substantial harm with investors,” she said.
Thankfully, the banking sector was not affected by the FTX meltdown. “Banking regulators have been very careful about crypto,” Yellen said.
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