US Treasury Secretary Janet Yellen recently pointed to the need for tougher rules for cryptocurrencies. Yellen drew attention to tougher rules by citing “non-bank” financial institutions, including cryptocurrency companies. Here are the details…
Cryptocurrencies in the focus of regulators
US Treasury Secretary Janet Yellen has proposed tougher rules for these financial service providers to strengthen the regulatory framework for non-banks. The proposed regulations aim to facilitate the supervision of non-bank institutions by the Federal Reserve Board, while removing the “inappropriate barriers” introduced during the Trump administration. Non-bank organizations are organizations that provide financial services without having a bank license or being insured by the Federal Deposit Insurance Corporation (FDIC). Examples of non-bank entities include venture capital firms, hedge funds, and cryptocurrency institutions.
Recent reports from the International Monetary Fund (IMF) highlighted emerging threats to the financial system, including rising inflation, rising interest rates and the liquidity crunch faced by non-banking institutions. The framework proposed by the Financial Stability Oversight Committee (FSOC) includes a two-step process for determining whether a company should be audited by the Fed. The FSOC was created after the 2008 financial crisis and is responsible for identifying and managing risks to the overall stability of the financial system.
The proposals will be voted on by the Council.
According to the proposed framework, the non-bank entity will first undergo an analysis based on data provided to the FSOC, followed by an in-depth assessment of data from the company itself, regulators and public information. After the proposal was unanimously accepted by the Council, it was opened to public opinion. Speaking about the proposal, Yellen stated that the FSOC will allow “to interact with the company’s primary regulator during any appointment review.” He said the non-bank appointment would provide the public with more information on how the appointment fits into the Council’s broader approach to monitoring and mitigating financial stability risk.
As we reported on Kriptokoin.com, the collapse of Silicon Valley Bank (SVB) and Signature Bank last month raised concerns about the overall stability of the banking system. However, Yellen stressed that the banking system remains intact with strong capital and liquidity positions. The proposed regulations for non-bank institutions reflect an increasing focus on strengthening the regulatory framework for financial service providers. As the financial environment continues to evolve and new risks emerge, it will be important for regulators to stay vigilant and adapt their approach to ensure the stability of the financial system. Time will tell what action will be taken in the future.
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