A recent report by the United States Government Accountability Office (GAO) highlights significant gaps in regulatory frameworks dealing with crypto assets, suggesting a thorough governmental approach to mitigate the same.
It states that no federal financial regulator holds centralized authority to regulate the significant market for crypto assets that do not classify as securities. This puts forward the dire need for a unified coordination mechanism to tackle blockchain-related risks and creating swift, well-suited responses. This mechanism could pave the way to collectively identifying risks and establishing a timely response system.
Furthermore, the GAO has expressed concerns over the fragmented U.S. financial regulatory structure, especially regarding stablecoins. The lack of standards outlining reserve levels and public disclosure of reserves marks a significant lacuna. The report implies a strong demand for regular audits, public disclosures of reserve assets and audit results, and a robust legal framework regarding redemption rights.
Interestingly, the report shines some light on decentralized finance’s (DeFi) role and its rising risks to the crypto economy and the larger macro market. The absence of intermediaries in DeFi stirs concerns about regulatory compliance and consumer protection. As the DeFi services shift towards more interconnectivity and decentralization, the risks, encompassing financial shocks and illicit finance, are escalating.
Regulatory bodies, including the Financial Crimes Enforcement Network, are advised to determine the application of existing regulations on these platforms.
Seven major U.S. financial regulators are suggested to establish or adapt a coordination mechanism together to respond promptly to the risks inflicted by blockchain-related products and services. However, only the NCUA agrees with the recommendations made in the report. Other regulators did not give a direct verdict on the recommendations but pointed towards existing coordination efforts through a plethora of forums, such as the FSOC, the President’s Working Group, and several international groups.
Despite the skepticism, the report calls to attention the urgent need for regulation and oversight in the rapidly-evolving industry of crypto assets. While the road to robust crypto regulation might be bumpy, it also brings with itself an opportunity for innovation and fair practices.
Source: Coindesk
