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- Crypto regulation urged by James to protect investors and national security.
- Stablecoins should be licensed in the US and backed by US dollars to ensure stability.
- Volatility of digital assets makes them risky for retirement savings and pension funds.
New York Attorney General Letitia James has also urged members of Congress to take action on cryptocurrency regulation. In a letter dated April 10, she sought federal laws to protect investors, the financial markets, and the country’s security against the dangers of unregulated cryptocurrencies.
James pointed out the following risks associated with the increase in cryptocurrencies. Speaking about the dangers of crypto, she said that without regulation, it may pose a threat to the US dollar hegemony. She also added that they are unregulated and hence promote unlawful conduct and manipulation of the market, posing high risks for Americans to lose a lot of money.
Source: Office of the New York State Attorney General
Stablecoin Licensing and Backing
James provided the following recommendations to Congress. Stablecoin issuers should be licensed and located within the US and meet rigorous regulatory measures. Additionally, she suggested that stablecoins should be backed by US dollars or treasuries to increase their credibility and security.
James also pointed out the importance of following Anti-Money Laundering regulations in cryptocurrency platforms. She encouraged the lawmakers to enact laws that would prohibit any form of self-referral, introduce prices that should not be misleading, and incorporate measures that protect against fraud. These changes would create better conditions for further investments, protection, and certain stability in the market.
Crypto Volatility Concerns
Another issue that bothered James was the possibility of investing in cryptocurrencies in the United States’ pension funds. She argued that the volatility of digital assets also makes them unsuitable for retirement savings. She also despaired over crypto-based exchange-traded funds (ETFs). Which she said are prone to being stolen, unlike other ETFs backed by stocks and bonds.
“The underlying value of cryptocurrency is unpredictable and not determined by true price discovery because they have no intrinsic value on which their prices are based.”
James’s call for higher standards has been made at the appropriate time. Recently, the US Department of Justice disbanded the federal cryptocurrency fraud enforcement division. Thus, there is still a need for increased regulatory scrutiny.
James called on Congress to take prompt action. She pointed out that the regulation of the cryptocurrency sector would benefit consumers, preserve the stability of the financial system as well as enhance national security. However, as the market advances and turns global, so does the pressure to increase regulation.
