The council calls for closer cooperation between the federal and state authorities of the USA in the regulation of cryptocurrencies.
The United States Financial Stability Oversight Council (FSOC) released its new annual report on Friday in which the Financial Stability Board raised its concerns about the continued adoption of stablecoins and other digital currencies .
With regard to stablecoins, the FSOC fears that consumer confidence could be undermined by a lack of liquidity, inadequate protection mechanisms, a lack of transparency and cyber attacks. "A run on stablecoins during a bad market situation could potentially have a shock effect on the economy and the entire financial system," as the report goes on to say.
The Council is also concerned about decentralized financial services (DeFi) , as excessive leverage in the area could lead to panic selling as soon as the associated assets fall in price. This in turn could result in so-called margin calls, which would only drive the price further down. In addition, users of the DeFi are subject to "considerable risks from exchange rate fluctuations, operational problems and cyber attacks".
In addition, the report calls for increased cooperation between federal and state authorities in the regulation of stablecoins and digital currencies.
Despite all these concerns, the FSOC explicitly emphasizes the innovation potential of the crypto industry:
“The development of digital currencies and the use of distributed ledger technology offer opportunities for innovation and the modernization of the financial infrastructure. Regulation is critical to the rapidly changing crypto market. "
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