As cryptocurrency values continue to slide, Treasury Secretary Janet Yellen called for more "effective oversight" of digital currency markets.
"The recent failure of a major cryptocurrency exchange and the unfortunate impact that has resulted for holders and investors of crypto assets demonstrate the need for more effective oversight of cryptocurrency markets," Yellen said in a statement Wednesday. "Over the past year, through the President's Working Group on Financial Markets and in response to the President's Executive Order on Digital Assets, the Treasury Department worked with its regulatory partners to identify risks in crypto markets. Some of the risks we identified in these reports, including comingling of customer assets, lack of transparency, and conflicts of interest, were at the center of the crypto market stresses observed over the past week."
Cryptocurrencies, a form of digital currency used in online transactions, is based on encryption technologies such as "blockchain" which uses a group of decentralized computers, or "nodes" to verify transactions securely on a network, according to Investopedia.
Because they are not directly tied to any nation's fiat currency, cryptocurrencies are not as tightly regulated as other financial institutions and services, making them riskier to users and investors.
Major cryptocurrency exchange FTX, which filed for bankruptcy last week, caused the $1 trillion market to falter, costing its former CEO Sam Bankman-Fried, 30, an estimated 94% of his personal fortune, CNN Business reported Nov. 10.
The downward spiral for the various currencies is continuing with almost all losing value as of Wednesday, according to a CNBC listing of the major cryptocurrency "tokens."
Yellen said that only through "rigorous" enforcement will "stabilize" the markets.
"Where existing regulations apply, they must be enforced rigorously so that the same protections and principles apply to crypto assets and services," she said. "The federal government, including Congress, also needs to move quickly to fill the regulatory gaps [President Joe] Biden's Administration has identified."
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