Crypto’s Impact on the Financial System: Janet Yellen’s Address to Congress

Janet Yellen Addresses Crypto Risks to Congress

US Treasury Secretary Janet Yellen is scheduled to address Congress today, focusing on the potential risks the crypto industry poses to the financial system.

Yellen’s Prepared Remarks

  • Yellen will emphasize the need for legislative action, specifically regarding the regulation of stablecoins and the spot market that are not considered securities.
  • Yellen will also discuss the challenges and uncertainties posed by digital assets, including runs on crypto-asset platforms, stablecoins, and price volatility.
  • The testimony will cover five primary areas identified by the Financial Stability Oversight Council (FSOC), including risks from the banking and nonbank financial sectors, climate-related financial stability risks, cybersecurity threats, the impact of artificial intelligence in financial services, and the specific risks associated with digital assets.

FSOC’s 2023 Annual Report

  • The FSOC’s 2023 annual report highlighted concerns about the price volatility and interconnectedness within the crypto industry.
  • The report and Yellen’s remarks are likely to spur legislative and regulatory bodies to focus more intensively on the sector.

SAB 121 and Crypto Accounting

  • US Congress is set to include discussions on SAB 121, an SEC bulletin that has sparked debate within the community.
  • This bulletin requires banks and firms that custody crypto to record customer holdings as liabilities on their balance sheets.
  • The resolution of this issue is crucial for the industry, as it directly impacts how crypto assets are accounted for and regulated.