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The Financial Stability Oversight Council (FSOC) is urging federal and state regulators to continue monitoring risks from digital assets and distributed ledger technologies (DLTs) to the financial system.
Founded in 2010, the FSOC was established to identify risks and address the emerging threats to financial stability. The collaborative body is chaired by the Secretary of the Treasury that brings together the expertise of the federal financial regulators.
In its 2019 annual report, the FSOC panel, which includes Treasury Secretary Steven Mnuchin, Federal Reserve Chair Jerome Powell, Securities and Exchange Commission Chair Jay Clayton, and Commodity Futures Trading Commission Chair Heath Tarbert, noted the ongoing innovations in the payments landscape, including digital assets and stablecoins.
The report said that if a stablecoin becomes widely adopted as a means of payment or store of value, it could affect the wider economy.
“Financial regulators should review existing and planned digital asset arrangements and their risks, as appropriate. These include risks to financial stability, including via both direct and indirect connections with banking services, financial markets, and financial intermediaries; risks to consumers, investors, and businesses associated with potential losses or instability in market prices; illicit financing risks; risks to national security; cybersecurity and privacy risks; and risks to international monetary and payment system integrity,” it said.
In late 2017, the FSOC formed a crypto and DLT-focused working group in order to promote consistent regulatory approaches and to identify, assess, and address potential risks.
“The Council encourages coordination among U.S. financial regulators to address potential issues that arise from financial innovation and will continue to use the Council’s digital assets and distributed ledger technology working group to promote consistent regulatory approaches and to identify and address potential risks,” the report added.
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