This article comes fromThis article comes from, by Brian Deese & Arati Prabhakar & Cecilia Rouse & Jake Sullivan

Odaily Translator | Nian Yin Si Tang

Odaily Translator | Nian Yin Si Tang

2022 is going to be a tough year for cryptocurrencies. In May, a so-called “stablecoin” collapsed, triggering a wave of bankruptcies. Just a few months later, a major cryptocurrency exchange collapsed. Many everyday investors who trusted cryptocurrency companies — including young people and people of color — have suffered badly, but thankfully, the turmoil in the cryptocurrency market has so far had little negative impact on the broader financial system . While cryptocurrencies may be relatively young, the behavior we’ve seen from some of the cryptocurrency companies and the risks that come with such behavior is not uncommon. As a government, our focus is to continue to ensure that cryptocurrencies do not undermine financial stability, protect investors, and hold bad actors accountable.

At the direction of President Biden, we have spent the past year identifying the risks of cryptocurrencies and using the powers of the Executive Branch to take action to mitigate those risks.

First, experts from across the U.S. government developed the first framework for developing digital assets in a safe and responsible manner, while addressing the risks that digital assets pose. To be sure, the technology that powers cryptocurrencies may offer faster, cheaper, and more secure means of payment. But this framework identifies clear risks. For example, some cryptocurrency entities ignore applicable financial regulations and basic risk controls—all steps taken to protect households, businesses, and the economy in the country. Additionally, cryptocurrency platforms and promoters often mislead consumers, sometimes have conflicts of interest, fail to adequately disclose, or commit outright fraud. Poor cybersecurity across the industry has allowed the Democratic People's Republic of Korea to steal more than $1 billion to fund its threat missile program.

Second, agencies are using their powers to step up enforcement where appropriate and issue new guidance as needed. Just this month, banking institutions issued a joint statement calling for the separation of risky digital assets from the banking system. Various government agencies have launched (or are working on) public awareness programs to help consumers understand the risks of buying cryptocurrencies. We encourage regulators to continue these efforts, including those aimed at addressing and limiting the exposure of financial institutions to digital asset risks.

But the events of the past year underscore that we need to do more. Agencies have doubled down on efforts to combat fraud, including the proliferation of false or misleading claims about FDIC-insured crypto assets. While the U.S. is already a global leader in combating money laundering and terrorist financing, law enforcement agencies are dedicating more resources to combating illicit activities involving digital assets. In the coming months, the U.S. government will also announce priorities for research and development in digital assets, which will help the technology that drives cryptocurrencies protect consumers by default.

Congress also needs to step up its efforts. For example, Congress should expand regulators' powers to prevent companies involved from misusing customers' assets -- which hurts investors and affects prices -- and to mitigate conflicts of interest. Congress could also strengthen transparency and disclosure requirements for cryptocurrency companies so investors can make more informed decisions about financial and environmental risks. To aid law enforcement, Congress could tighten penalties for violations of illicit financing rules and prohibit cryptocurrency intermediaries from tipping criminals. It can provide funding for strengthening law enforcement capacity-building, including in collaboration with international partners. Limit the risks cryptocurrencies pose to the financial system by following the steps outlined by the Financial Stability Oversight Council in its recent report, including addressing the risks of stablecoins.

While Congressional action in these areas would be welcome, Congress could also make our jobs harder and exacerbate risks to investors and the financial system. Legislation should not give the green light for mainstream institutions such as pension funds to dive headfirst into the cryptocurrency market. Over the past year, the limited exposure of traditional financial institutions to cryptocurrencies has prevented turmoil in cryptocurrencies from affecting the broader financial system. It would be a big mistake if the legislation reversed course and instead deepened the connection between cryptocurrencies and the wider financial system.