Federal panel urges Congress to expand crypto regulation ahead of Trump’s return
Bitcoin icon and a figurine of former US President Trump (Courtesy of Bitcoin Magazine)
As U.S. President-elect Donald Trump prepares for his return to the White House, a U.S. federal panel has called for new legislative measures that would increase regulatory authority over certain cryptocurrencies, signaling a potential shift in the U.S. government’s approach to the growing digital asset market.
On Friday, the Financial Stability Oversight Council (FSOC), which is led by Treasury Secretary Janet Yellen, urged Congress to pass legislation that would grant federal regulators explicit control over crypto assets that are not classified as securities. The council also recommended the development of a federal framework specifically for stablecoin issuers.
These digital currencies, often pegged to stable assets like the U.S. dollar, have gained traction as a more stable alternative to more volatile cryptocurrencies, although the FSOC expressed concerns about their potential to undermine financial stability.
Stablecoins are considered less prone to fluctuations than their more volatile counterparts, but regulators have raised alarm over the risk they pose, especially in times of market stress.
The FSOC highlighted the need for “appropriate risk management standards,” acknowledging that stablecoins could be vulnerable to sudden market runs, which could create broader systemic risks.
The panel’s recommendations come at a pivotal time, with growing attention on the role of digital currencies in the financial landscape. In a move likely to influence regulatory discourse, Trump recently appointed an “AI and Crypto Czar” to guide his administration’s approach to cryptocurrency and artificial intelligence.
This appointment underscores the Trump administration’s commitment to strengthening its ties with the tech and crypto sectors, areas where Trump has previously expressed ambition to establish the U.S. as the global leader.
Yellen, in her remarks ahead of the FSOC’s annual report, underscored that technological advancements, while bringing efficiencies, also carry significant risks. “Digital assets and AI bring financial risks, cyber risks, and risks from third-party service providers,” Yellen said, emphasizing the need for enhanced coordination among regulators to address these emerging threats. She also called for a focused effort to develop interagency expertise, specifically in assessing and monitoring the systemic risks posed by AI within the financial sector.
While much of the focus remains on digital assets, Yellen also pointed to other ongoing concerns, particularly in the commercial real estate sector. “Credit risk in the commercial real estate sector became more evident this year, and regulators must continue to address it,” Yellen added, reinforcing that the FSOC’s mandate extends beyond cryptocurrency to encompass broader financial stability issues.
As the Trump administration prepares to take office, these recommendations highlight the growing urgency of establishing clearer regulatory frameworks for digital assets, an area that has seen rapid growth and continued market volatility. How lawmakers respond to the FSOC’s proposals could shape the future of cryptocurrency regulation in the United States and signal the direction of Trump’s economic policies.
