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Janet Yellen Told Members Of Congress That Cryptocurrency Poses No Systemic Risk To The Financial System

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On Thursday, Treasury Secretary Janet Yellen told members of Congress that she does not feel the cryptocurrency market has developed to the point where it constitutes a “systemic risk,” a designation that can unleash a slew of new regulatory measures.

Yellen said this during a hearing before the House Committee on Financial Services when members questioned her on macroeconomic difficulties but also brought up the topic of stablecoins several times.

The present crypto market crash and crypto tokens are supposed to preserve a peg to a fiat currency.

“I can’t say [stablecoins] have reached a scale where they’re financial stability concerns,” said Yellen.

Rep. Jim Himes (D-CT) asked her if she thought a $2 trillion crypto market was substantial enough to trigger the systemic risk classification as a veteran of the 2008 financial crisis. In light of the current crypto market meltdown, Himes said that the $2 trillion amount was now substantially lower.

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While Yellen agreed with Himes that a $2 trillion market cap was insufficient to justify a systemic risk designation, she refused to state at what level the label would apply—for example, $5 trillion or $6 trillion.

Following the 2008 financial crisis, Congress passed laws recognising some significant financial institutions, including banks and insurer AIG, as constituting a “systemic risk” to the US economy and imposing a series of oversights on their business activities, including increased capital reserves.

Yellen also stated that, while crypto and stablecoins presently do not satisfy the systemic criterion, this may change in the future.

“I wouldn’t characterize it as a real threat to financial stability, but they’re growing very rapidly and present the same kind of risks we’ve known for centuries from bank runs,” she said.