US financial watchdogs ask Congress to okay further oversight on Bitcoin

The Financial Stability Oversight Council (FSOC) in its latest report on cryptocurrencies suggests the digital assets market needs a lot more policing to help curb potential risks likely to crop up given the rapid adoption across the financial system.

The committee’s report has 10 recommendations, among which one seeks to see Congress grant more power to market regulators, particularly in over regulation of spot Bitcoin (BTC) trading.

Regulating bitcoin trading

While the experts, including the Chairs of the US Federal Reserve, the Treasury as well as US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), agree that regulation is already underway under existing laws.

However, while the SEC and CFTC continue to work as currently allowed, further enforcement will be helped if Congress approves more resources to help police the market – with bitcoin highlighted as one that might need these additional powers.

As per the FSOC report on Monday, the ability to properly regulate bitcoin or other cryptocurrencies that do not fall under the securities laws, is greatly hampered. BTC, the council noted, isn’t directly under the purview of the top federal agencies.

“US law provides for limited direct federal oversight of spot markets for crypto-assets that are not securities i.e the market in which trades occur for Bitcoin and possibly other crypto-assets that are not securities. As a result, those markets may not feature robust rules and regulations designed to ensure orderly and transparent trading, to prevent conflicts of interest and market manipulation, and to protect investors and the economy more broadly.”

As well as more clarity on bitcoin trading, other aspects that see regulators target more help from Congress include on recordkeeping requirements, cybersecurity and the need for market players to segregate customer assets – the latter also one of the issues highlighted in a bipartisan bill looking to effectively demarcate SEC and CFTC regulatory scopes in light of crypto.

The Financial Stability Oversight Council was created in the aftermath of the 2008 financial crisis, and one of its main roles is to identify and mitigate potential threats to the US financial system.

Its report thus also wants to see Congress come up with a regulatory framework for stablecoins, which is one of the areas that’s seen heightened regulatory action since the collapse of TerraUSD in May.

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