Pressure from Biden on Congress for crypto bill

US President Joe Biden has specifically asked Congress to come together to quickly pass regulation for the crypto industry.

Biden emphasizes the need for crypto regulation

Following his executive order last April, in which the US president issued a call to all stakeholders to analyze and study the impacts of digital assets in the real economy, Biden explicitly called on Congress to come together to quickly approve regulation for the cryptocurrency sector.

This call, which can hardly go unheeded, comes after the US Financial Stability Oversight Council (FSOC), a group of the country’s top financial regulators, including the Treasury, released a report on Monday urging policymakers to reach agreement on a number of areas, including how to regulate Bitcoin and other crypto assets sold on the spot market.

In a press statement, Treasury Secretary Janet Yellen said the report:

“Provides a strong foundation for policymakers as we work to mitigate the financial stability risks of digital assets while realizing the potential benefits of innovation.”

The FSOC report, comes as members of Congress are debating how to regulate in particular the stablecoin sector, now worth $140 billion, to subject it to the rules of traditional financial markets. But according to some congressional sources, the legislation would still be months away from being passed. 

And that is why the warning from Biden and the Treasury secretary points to an accelerated timetable.

Concerns are over the possible recurrence of a collapse like that of the algorithmic stablecoin linked to Terra, which caused a real earthquake in the cryptocurrency market in May. Stablecoins are seen as the real danger to mainstream financial stability, which is why there is a focus on passing precise regulation soon.

The market needs clear legislation for crypto and stablecoins

For some time now, the SEC, the US financial markets regulator, chaired by Gary Gensler, who participated in the report, has been waging a real personal battle to demand precise regulation of the sector. There are dozens of investigations and prosecutions against cryptocurrency companies accused of selling securities without having authorization, such as the one against Ripple, which has been going on for nearly two years.

Concerns expressed in the report also address the very high volatility of the market, which without controls, can be a real gamble not only for investors but also for financial stability itself.

The report reads:

“Cryptoasset prices appear to be primarily driven by speculation rather than grounded in current fundamental economic use cases, and prices have repeatedly recorded significant and broad declines.”

The FSOC report therefore suggests greater cooperation among the various agencies to try to control existing potential loopholes that allow cryptocurrency companies to act and operate under a regulatory regime more conducive to their business:

“Some crypto asset businesses may have affiliates or subsidiaries operating under different regulatory frameworks, and no single regulator may have visibility into the risks across the entire business.”

It is precisely in an effort to limit these behaviors that the report calls for Congress to pass legislation to provide regulators with access to subsidiaries of crypto platforms and to establish a legal framework for stablecoin issuers.