Janet Yellen continues to call for legislation to beef up crypto, AI regulation

Janet Yellen continues to call for legislation to beef up crypto, AI regulation

Feb. 9, 2024

By Assad Jafri

Treasury Secretary Janet Yellen called on Congress to enact stricter regulatory measures for cryptocurrencies and to maintain vigilance on deploying artificial intelligence (AI) in financial services during her latest testimony before the Senate Banking, Housing, and Urban Affairs Committee on Feb. 8.

The testimony, part of the Financial Stability Oversight Council’s (FSOC) annual report, highlighted the increasing complexity and potential risks within the digital asset sector and the financial industry’s burgeoning reliance on AI technologies. Her statements echoed the sentiments from her Congressional hearing a few days earlier and her general stance toward the sector.

Yellen’s testimony also broached broader issues of concern, including the impacts of climate change on financial stability, particularly about the insurance sector, and the strategic challenges posed by U.S. technological investments potentially benefiting foreign military advancements.

Regulatory gaps

The FSOC, conceived following the 2008 financial crisis to identify and mitigate systemic risks, is now spotlighting the rapid evolution and challenges posed by digital currencies and the digitalization of financial markets.

Yellen’s remarks pointed to a specific concern over stablecoins, digital currencies pegged to traditional assets like the dollar, citing their vulnerability to sudden withdrawals that could trigger financial instability. She stressed the need for transparent regulatory frameworks to oversee these and other digital assets to protect against market manipulation and fraud.