Trump vowed that the United States would be the “cryptocurrency capital of the world” and, during his election campaign, received significant financial support from cryptocurrency backers.
On Friday, the Financial Stability Oversight Council (FSOC) recommended that Congress pass legislation “granting federal financial regulators explicit authority to regulate the cash market for crypto assets that are not securities.”
He also urged lawmakers to approve rules creating a federal framework for stablecoin issuers.
Stablecoins are cryptocurrencies typically pegged to real-world units such as the dollar and are considered less volatile than other cryptocurrencies – although the FSOC has noted that they could pose a risk to financial stability.
The council noted the need for “appropriate risk management standards,” saying stablecoins could be vulnerable to runs.
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The FSOC is chaired by Treasury Secretary Janet Yellen and includes members including Federal Reserve Chairman Jerome Powell and other regulators. Their recommendations come amid growing interest in digital assets, with Trump this week appointing an “AI and crypto czar” to advise the incoming administration on cryptocurrency and artificial intelligence.
In a speech before the approval of the annual report, Yellen noted that the FSOC has addressed emerging risks related to technological changes.
She noted that despite benefits such as efficiency, digital assets and AI bring “financial risks, cyber risks and third-party service provider risks.”
“We recommend developing more cross-institutional expertise to analyze and monitor potential systemic risks associated with the use of AI in the financial services sector while facilitating innovation,” she said.
Beyond crypto and AI, Yellen stressed that officials remain focused on credit risk in the commercial real estate sector.
“This risk has become more evident this year and regulators should continue to focus on the financial sector’s ability to address it,” Yellen said.
