The Financial Stability Oversight Council (FSOC) published its 2024 annual report. The report discussed various risks and areas of concern in the US and global financial system. Particular emphasis was placed on the role of stablecoins and the digital asset sector, but it was not suggested that the FSOC take concrete steps to intervene in these issues.
FSOC’s Warnings
FSOC warned that uncontrolled stablecoin growth this year, as in the past few years, could cause problems for the US and global financial systems. The council noted that stablecoins operate outside the federal regulatory framework, which could pose a risk to financial stability.
In the report, the fact that Tether’s USDT has approximately 70% of the stablecoin market worldwide stood out as an issue that regulators should pay attention to. FSOC emphasized that stablecoins are vulnerable to sudden outflows without appropriate risk management standards, and market concentration and opacity issues increase this risk.
Call for Legal Regulation
FSOC has again requested that legislation regarding stablecoins and market structure be codified by Congress. The consensus raises concerns that the crypto-asset market may continue to be subject to significant fraud and manipulation.
“Stablecoins pose a potential risk to financial stability as they are extremely vulnerable to sudden outflows without appropriate risk management standards. This risk is amplified by issues related to market concentration and market opacity.”
Treasury Secretary Janet Yellen stated that digital assets and artificial intelligence bring potential benefits such as efficiency, as well as financial risks, cyber risks and risks from third-party service providers. The FSOC called for the creation of a comprehensive federal discretionary framework for stablecoin issuers and the passage of legislation for crypto assets that addresses identified risks.
Although the FSOC has warned that it may intervene if Congress does not take the necessary steps, it remains unclear what steps it can take in this regard. In the coming months, the council will take shape with new regulators.
In conclusion, the FSOC’s 2024 report once again demonstrates the need to regulate digital assets and stablecoins. While the importance of federal regulations for maintaining financial stability was emphasized, it was stated that current deficiencies should be eliminated.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
