US Financial Stability Oversight Council urges congressional action on crypto

According to the FSOC, issues at FTX had “precipitated price decreases in Bitcoin and other crypto-assets” but “had a limited impact on the broader U.S. financial system.”

Officials with the United States Financial Stability Oversight Council, or FSOC, have recommended U.S. lawmakers pass legislation aimed at addressing regulatory gaps for crypto-related activities.

In its annual report released on Dec. 16, the FSOC recommended members of Congress pass legislation granting “explicit rulemaking authority for federal financial regulators over the spot market for crypto-assets,” noting that tokens previously identified as securities would be exempt. The council also noted the lack of a comprehensive regulatory framework — specifically addressing stablecoins and visibility and supervision of crypto firms — in the United States.

The FSOC cited the recent downfall of crypto exchange FTX as part of its background information in recommending actions on digital assets. According to the council, issues at FTX had “precipitated price decreases in Bitcoin and other crypto-assets” but “had a limited impact on the broader U.S. financial system.”

“Risks from this speculative, volatile, and what I believe is a largely noncompliant market put investors at risk,” said Securities and Exchange Commission chair Gary Gensler on the FSOC report. “This is why bringing intermediaries and issuers of crypto securities tokens into compliance is so important. While the risks from the crypto markets generally do not appear to date to have spread to the traditional financial sector, we must remain vigilant to guard against that possibility.”

Related: Senate Banking Committee chair calls for coordination with Treasury on crypto

The annual report reiterated calls for legislation as one from the FSOC in October, which the council released in accordance with U.S. President Joe Biden’s executive order on crypto. At the time of publication, both the SEC and the Commodity Futures Trading Commission have argued in favor of their respective agencies taking a leading role in regulating digital assets in the United States — the report did not seem to suggest which body should assume responsibility upon instructions from Congress.