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
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

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.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Sandali Handagama

Sandali Handagama is CoinDesk's deputy managing editor for policy and regulations, EMEA. She does not own any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.