By: Eva Baxter
During her recent testimony before the Senate Banking, Housing, and Urban Affairs Committee, Treasury Secretary Janet Yellen encouraged Congress to adopt more stringent regulatory measures for cryptocurrencies and artificial intelligence (AI) in financial services. This testimony is part of the annual report of the Financial Stability Oversight Council (FSOC) and echoes her previous calls for tighter regulations.
The FSOC, formed in the wake of the 2008 financial crisis, is now focusing on the fast-paced advancement and challenges brought by digital currencies and the digitization of financial markets. Notably, Yellen's comments addressed her concerns regarding stablecoins, digital currencies tied to assets like the dollar, due to their potential to create financial instability. She emphasized the necessity of a clear regulatory framework to monitor these and other digital assets, thereby preventing market manipulation and fraud.
Furthermore, the dialogue explored AI's role in the financial sector, particularly the potential systemic vulnerabilities it might introduce. Yellen championed a proactive approach to understand and mitigate these risks. Financial institutions and regulatory bodies must improve their knowledge and tracking systems to preempt potential AI-driven disruptions in the market.
As digital assets continue to penetrate mainstream finance and AI technologies evolve, Yellen's stance underscores the urgent need for updated, comprehensive regulatory measures in safeguarding financial stability and national security in an increasingly digital world.
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