U.S. Regulators Target Cryptocurrencies For Greater Oversight
May 21, 2021 at 09:52 AM EDT
U.S. Federal Reserve Chair Jerome Powell has targeted cryptocurrencies, saying they pose risks to financial stability and indicating that greater regulation of the increasingly popular digital coins may be needed. At the same time, the U.S. Treasury Department raised concerns that wealthy individuals could use largely unregulated cryptocurrencies to avoid taxes and said it wants big crypto asset transfers reported to government authorities. The back-to-back announcements came in a week when Bitcoin, the most popular cryptocurrency, fell as much as 30% after China announced new curbs on the sector. Fed Chair Powell underlined cryptocurrency risks in a video message that laid out a clearer timetable as the Fed explores the possibility of adopting its own digital currency. While highlighting the potential benefits of advances in financial technology, Powell said cryptocurrencies, stablecoins and other innovations "may also carry potential risks to those users and to the broader financial system." As the technology advances, "so must our attention to the appropriate regulatory and oversight framework." Powell's comments signal how seriously the U.S. central bank is taking the surge in popularity and market values of non-traditional currency options such as Bitcoin, especially as it looks to develop a digital version of the U.S. dollar, the world's reserve currency. While the U.S. Federal Reserve and some other developed economies are still conducting research on what a central bank digital currency would look like, China is piloting a digital version of the yuan, with plans to ramp up usage before the 2022 Winter Olympics in Beijing. Collectively, cryptocurrencies have a current market capitalization of about $2 trillion U.S.