The Financial Stability Oversight Council Warns of the Dangers

David Kemp

Bitcoin, along with various digital coins, including stablecoins, can threaten the global economy and financial system. This statement was made by the Financial Stability Oversight Council.

Dangers of stablecoin for the global economy

Financial Stability Oversight Council wrote, "If fixed-value coins are widely distributed and widely used as a means of payment and a means of preserving value, problems in their functioning can negatively affect the world economy. Financial regulators should evaluate existing crypto assets and those that will be created in the future, as well as their risks." In the article "What are stablecoins" you can read in detail about the features of these coins.

The FSOC noted Bitcoin and other cryptographic currencies, indicating risks for businesses, investors and consumers that are associated with market price instability and possible losses.

Another area of risk is the financing of illegal activities, cyber security, the integrity of international payment and monetary systems, national security and privacy.

The Financial Stability Oversight Council expressed doubts about the blockchain technology, in particular the lack of confidence in its successful future, "The achievements made did not show the predicted effectiveness and advantages of the distributed registry technology. As a result, many things were revised in a negative way."

Since the beginning of 2018, the FSOC has created a working group on cryptographic currencies. It included us Federal Reserve Chief Jerome Powell, Treasury Chief Steven Mnuchin, CFTC Chief Heath Tarbert, and SEC Chief Jay Clayton.

Working group on digital money under the US government

Steven Mnuchin, who is the head of the us Treasury Department, commented on the creation of the FSOC working group. He stated, "We pay a lot of attention to digital money."

The FSOC's task is to assess possible risks to the stability of the us financial system. Mr Mnuchin said he was concerned about speculation in the cryptographic currency market, which he attributed to high risks for inexperienced investors. Strong volatility of crypto assets can cause damage to them. The representative of the financial Department noted, "It is important to make sure that consumers understand all the risks when trading digital money. There is no doubt that they may suffer."

The US Treasury Department has announced plans to work with its G20 partners on regulating the digital industry and preventing illegal activities related to crypto assets. Mnuchin said that the fed does not see an urgent need to digitalize the us dollar. The Financial Department does not think that state digital money will help Venezuela and the Russian Federation avoid the consequences of the sanctions regime.

The U.S. Treasury is concerned about the billions of dollars from the illegal activities that take place through crypto currencies

The head of the US Treasury Department, Steven Mnuchin, said that billions of dollars pass through digital currencies, including bitcoin, which are used in illegal activities. The official spoke about the need for the same regulation of providers of classical financial services and in the field of cryptographic assets.

Mnuchin reported on the network's anti-financial crime regulations and the United States Bank Secrecy Act. In his opinion, regulators should make sure that bitcoin is used exclusively for legal purposes. At the same time, the Finance Department supports innovations that reduce costs, mainly for payments to other countries.

The US Treasury Secretary supports the General attitude of the "Big seven" to the Libra cryptocurrency being developed by Facebook. He considers countering the illegal use of digital money a national security issue that the White house should be concerned about.

FinCEN has updated its guidance on cryptographic currencies

For the first time since 2013, the financial crime network has published a guide that sets out the principles that cryptocurrencies must meet in accordance with the Bank secrecy Law and legal norms in the field of financial transfers.

There are 6 parts in the document structure. Part I describes the main concepts, Part II describes the current regulation in the field of financial transfers, Part III includes the organization's guidelines from 2013, and Parts IV to VI describe how cryptocurrencies and the business associated with them are regulated by the current AML legislation.

The guide summarizes the current regulatory framework, it does not imply any changes in the current legislation.

Decentralized applications can be referred to as a money transfer service even if they do not require a centralized operator to operate. Developers of such programs and their users may be subject to FinCEN regulation.

Still, non-custodial wallets for crypto archives cannot be considered money transfer operators, which is not true for Coinbase-type wallets that store users' private keys and are subject to regulation in this industry.

 AML legislation does not apply to decentralized exchanges. The only exceptions are sites that aim only to find a seller and buyer.

US financial regulators warn of possible threats to the global economy from cryptographic currencies, especially stablecoins. To prevent this, various organizations are created and various laws are passed. Our portal publishes latest and current news that will help you to navigate the environment in the market and to obtain information about the forecasts of experts.