The Financial Stability Oversight Council (FSOC) released its annual report for 2024, drawing attention to the risks threatening the US and global financial systems. The report warns that uncontrolled growth of stablecoins could exacerbate these threats. However, it does not provide concrete steps to address these issues.
Increasing Risks of Stablecoins on the Financial System
FSOC stated that stablecoins are currently not subject to any federal regulatory framework. The report emphasized that the market size and lack of transparency of stablecoins pose a potential threat to the US financial system. It noted, “Stablecoins are highly sensitive to liquidity issues without appropriate risk management standards, which is further exacerbated by market concentration and lack of transparency.”
The Council cited Tether‘s USDT, which constitutes 70% of the global stablecoin market, as an example. It stressed that this significant market share should be carefully monitored for financial stability. Additionally, while some stablecoins are subject to state-level oversight, these regulations are deemed insufficient.
Clear Regulatory Needs for the Cryptocurrency Market
FSOC also pointed out that the US financial system faces risks from the cryptocurrency market. The report noted that many cryptocurrency companies and issuers do not comply with US financial regulations, increasing the risks of fraud and manipulation. “The Council recommends that Congress enact legal regulations granting clear authority to federal regulators for spot markets of non-security cryptocurrencies,” it stated.
US Treasury Secretary Janet Yellen highlighted that artificial intelligence and cryptocurrencies introduce new risks to the financial system. “While these innovations may enhance efficiency, they also create financial and cyber risks, as well as dangers from third-party service providers,” she said. FSOC emphasized the need for comprehensive federal regulation for stablecoin issuers and a legal framework for cryptocurrencies.
