The White House has released what it called a roadmap to mitigating the key risks posed by cryptocurrencies. The roadmap talks about how the year 2022 was a tough year for cryptocurrencies. “In May, a so-called “stablecoin” imploded, prompting a wave of insolvencies. Just months later, a major cryptocurrency exchange collapsed. Many everyday investors who trusted cryptocurrency companies—including young people and people of color—suffered serious losses, but, thankfully, turmoil in the cryptocurrency markets has had little negative impact on the broader financial system to date,” it says. The focus of the roadmap is said to be on continuing to ensure that cryptocurrencies cannot undermine financial stability, to protect investors, and to hold bad actors accountable. It goes on to “identify the risks of cryptocurrencies and act to mitigate them using the authorities that the executive branch has.”
Some cryptocurrency entities ignore financial regulations
“First, experts across the administration have laid out the first-ever framework for developing digital assets in a safe, responsible way while addressing the risks they pose. To be sure, the technologies powering cryptocurrencies may offer ways to make payments faster, cheaper, and safer. But this framework identifies clear risks. For example, some cryptocurrency entities ignore applicable financial regulations and basic risk controls—practices that protect the country’s households, businesses, and economy. In addition, cryptocurrency platforms and promoters often mislead consumers, have conflicts of interest, fail to make adequate disclosures, or commit outright fraud. And there is poor cybersecurity across the industry that enabled the Democratic People’s Republic of Korea to steal over a billion dollars to fund its aggressive missile program,” says the document on risks.
It goes on to emphasise on the need to create awareness among people. “Second, agencies are using their authorities to ramp up enforcement where appropriate and issue new guidance where needed. The banking agencies issued joint guidance, just this month, on the imperative of separating risky digital assets from the banking system. Agencies across government have launched—or are now developing—public-awareness programs to help consumers understand the risks of buying cryptocurrencies. We encourage regulators to continue these efforts, including those designed to address and limit financial institutions’ exposure to the risks of digital assets.”
Some cryptocurrency entities ignore financial regulations
“First, experts across the administration have laid out the first-ever framework for developing digital assets in a safe, responsible way while addressing the risks they pose. To be sure, the technologies powering cryptocurrencies may offer ways to make payments faster, cheaper, and safer. But this framework identifies clear risks. For example, some cryptocurrency entities ignore applicable financial regulations and basic risk controls—practices that protect the country’s households, businesses, and economy. In addition, cryptocurrency platforms and promoters often mislead consumers, have conflicts of interest, fail to make adequate disclosures, or commit outright fraud. And there is poor cybersecurity across the industry that enabled the Democratic People’s Republic of Korea to steal over a billion dollars to fund its aggressive missile program,” says the document on risks.
It goes on to emphasise on the need to create awareness among people. “Second, agencies are using their authorities to ramp up enforcement where appropriate and issue new guidance where needed. The banking agencies issued joint guidance, just this month, on the imperative of separating risky digital assets from the banking system. Agencies across government have launched—or are now developing—public-awareness programs to help consumers understand the risks of buying cryptocurrencies. We encourage regulators to continue these efforts, including those designed to address and limit financial institutions’ exposure to the risks of digital assets.”
Safeguards are coming
It says that the events of the past year underscore that more is needed. “In the coming months, the Administration will also unveil priorities for digital assets research and development, which will help the technologies powering cryptocurrencies protect consumers by default.”
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