Regarding the shortcomings in crypto oversight, Treasury Secretary Janet Yellen has been pressed by four US lawmakers. The lawmakers questioned Yellen about how the Financial Stability Oversight Council (FSOC), which she chairs, believes existing laws should apply to bitcoin, ether, and non-security crypto assets. Yellen responded by detailing the council's,

Congress Wants Yellen to Provide Answers

Senators Patrick McHenry, Glenn Thompson, Dusty Johnson, and French Hill wrote to Treasury Secretary Janet Yellen on Tuesday regarding cryptocurrency regulation in the wake of her appearance before the House Committee on Financial Services. "Pass legislation to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities," Yellen urged Congress to do in her testimony.

Hill chairs the Subcommittee on Digital Assets, Financial Technology, and Inclusion; Johnson chairs the Subcommittee on Commodity Markets, Digital Assets, and Rural Development; McHenry chairs the House Committee on Financial Services; Thompson chairs the House Committee on Agriculture.

The letter states that the House Committees on Agriculture and Financial Services "embarked on a historic effort to craft legislation providing increased regulatory oversight over the digital asset markets" in response to the collapse of the cryptocurrency exchange FTX." The Financial Innovation and Technology Act for the 21st Century (FIT21) specifically states that it "would ensure the customer protections seen in the current financial regulatory structure apply to intermediaries and digital asset-related activities" and "would provide federal regulators with clear authority over the digital asset spot markets."

The Financial Stability regulation Council (FSOC), which Yellen leads, has highlighted the same holes that the parliamentarians aimed to fill with their legislation, and they have given "repeated warnings about the lack of oversight of the digital asset markets," according to the MPs. There are "opportunities for regulatory arbitrage, limited direct oversight of the spot market for digital assets that are not securities, and whether vertically integrated market structures can and should be accommodated under existing laws and regulations" among the gaps.

The members of Congress shared with Yellen their thoughts on the jurisdiction of the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) over cryptocurrency regulation.

The Treasury Secretary was then questioned by the parliamentarians. As it pertains to federal monitoring of the spot market for digital assets that are not securities, the letter asks for more information "to further understand how FSOC is facilitating coordination and communication between the SEC and CFTC." Yellen was required to reply by February 20 at the latest.

First, the Congressmen asked for the minutes of every meeting held by the Digital Assets Working Group between 2017 and 2023. The MPs also want Yellen to clarify the FSOC's stance that securities regulations cover all issuers of digital assets and secondary transactions using these assets.

Moreover, they emphasized that "the final investment contract analysis is backwards looking, made by a court after the transaction in question has been completed," citing SEC Chair Gary Gensler's assertion that the majority of cryptocurrency tokens qualify as securities. "In the absence of comprehensive legislation, how does this reactive legal authority provide adequate protection for customers?" was the question posed to Yellen.

The Treasury Secretary was also questioned by the MPs, who wanted to know if FSOC believed that ether and bitcoin were not securities. Furthermore, they asked: "Is the Council of the opinion that the CFTC should be given more authority to cover the spot market for non-security digital assets, considering the CFTC's current jurisdiction over certain segments of the non-security digital asset market?"

Regarding crypto supervision, what do you think of the congressmen' letter to Janet Yellen?