FTX Collapse Exposed 'Weaknesses' in Crypto, Janet Yellen Says: Report

The U.S. Treasury Secretary said the crypto sector is in need of "very careful regulation" while some lawmakers are already preparing to propose tougher rules.

AccessTimeIconNov 14, 2022 at 12:57 p.m. UTC

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.

In the aftermath of crypto exchange FTX's fall from grace, U.S. Treasury Secretary Janet Yellen said the industry needs "very careful regulation," Bloomberg reported Saturday.

“It shows the weaknesses of this entire sector,” Yellen said referring to the collapse of Sam Bankman-Fried's multibillion dollar enterprise – the same one that was, just months ago, looking to rescue other embattled crypto firms from the market crash earlier this year.

The U.S. government is already looking into regulating the industry under an executive order from President Joe Biden.

In the months leading up to the collapse, Bankman-Fried said he'd spent time conversing with lawmakers and regulators in Washington D.C. ahead of midterm elections. But after the exchange was locked in a liquidity crunch and quickly unraveled, Sen. Sherrod Brown and and Sen. Elizabeth Warren called for investigations.

Congressman and crypto skeptic Brad Sherman says he will work with his colleagues at the House of Representatives to "examine options for federal legislation."

The effects of FTX's collapse could have been worse if crypto was more connected to the traditional financial system, Yellen said.

“At least it’s not deeply integrated with our banking sector and, at this point, doesn’t pose broader threats to financial stability,” Yellen told Bloomberg.


DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.

CoinDesk - Unknown

Sandali Handagama is a CoinDesk reporter with a focus on crypto regulation and policy. She does not own any crypto.