Janet Yellen continues to call for legislation to beef up crypto, AI regulation Janet Yellen continues to call for legislation to beef up crypto, AI regulation
Yellen said that cryptocurrencies and stablecoins pose significant financial stability risks and called on Congress to create a comprehensive regulatory framework to monitor and supervise the sector.
2 min read
Updated: Feb. 9, 2024 at 5:58 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Treasury Secretary Janet Yellen called on Congress to enact stricter regulatory measures for cryptocurrencies and to maintain vigilance on deploying artificial intelligence (AI) in financial services during her latest testimony before the Senate Banking, Housing, and Urban Affairs Committee on Feb. 8.
The testimony, part of the Financial Stability Oversight Council’s (FSOC) annual report, highlighted the increasing complexity and potential risks within the digital asset sector and the financial industry’s burgeoning reliance on AI technologies. Her statements echoed the sentiments from her Congressional hearing a few days earlier and her general stance toward the sector.
Yellen’s testimony also broached broader issues of concern, including the impacts of climate change on financial stability, particularly about the insurance sector, and the strategic challenges posed by U.S. technological investments potentially benefiting foreign military advancements.
Regulatory gaps
The FSOC, conceived following the 2008 financial crisis to identify and mitigate systemic risks, is now spotlighting the rapid evolution and challenges posed by digital currencies and the digitalization of financial markets.
Yellen’s remarks pointed to a specific concern over stablecoins, digital currencies pegged to traditional assets like the dollar, citing their vulnerability to sudden withdrawals that could trigger financial instability. She stressed the need for transparent regulatory frameworks to oversee these and other digital assets to protect against market manipulation and fraud.
Yellen also stressed the dual challenges of ensuring financial stability and combating illicit finance through digital platforms. Her testimony referenced the use of digital currencies by terrorist organizations to funnel funds and highlighted the necessity for updated regulatory tools to combat these threats effectively.
Yellen proposed an enhancement of the Treasury’s capabilities through legislative support, aiming to patch the regulatory gaps that have emerged in the digital age.
AI in financial services
The dialogue with Senate members also ventured into the realm of AI and its implications for the financial sector.
Prompted by inquiries from committee members, Yellen acknowledged AI’s potential to introduce systemic vulnerabilities, advocating for a proactive approach to understanding and mitigating these risks.
She emphasized the importance of financial institutions and regulatory bodies enhancing their knowledge and monitoring systems to stay ahead of potential AI-induced market disruptions.
The Treasury Secretary’s call to action reflects a growing consensus on the need for comprehensive legislative frameworks to address the multifaceted risks presented by the digital economy and the integration of advanced technologies in finance.
As digital assets continue to integrate into mainstream financial systems and AI technologies advance, Yellen’s testimony emphasizes the critical importance of evolving regulatory measures to safeguard financial stability and national security in an increasingly interconnected world.
Mentioned in this article
Posted In: Regulation
Author 
Assad Jafri
AJ, a passionate journalist since Yemen's 2011 Arab Spring, has honed his skills worldwide for over a decade. Specializing in financial journalism, he now focuses on crypto reporting.
Editor Editor 
News Desk
CryptoSlate is a comprehensive and contextualized source for crypto news, insights, and data. Focusing on Bitcoin, macro, DeFi and AI.
In this article
Janet Louise Yellen is an American economist and educator serving as the 78th United States secretary of the treasury under President Joe Biden since January 26, 2021.
