The U.S. government is set to tighten regulations to mitigate the growing risks associated with the crypto industry. This development comes after increased scrutiny following the collapse of FTX and Terra Luna in 2022.
In a press release on January 27, the White House put forward a comprehensive roadmap designed to protect investors and hold bad actors accountable. The roadmap highlighted several measures for more effective regulations in the crypto industry.
A Two-Pronged Approach By U.S. Government
The U.S. government revealed that it had spent the past two years identifying the risks of cryptocurrency and finding ways to mitigate them. To ensure these measures are implemented, the White House intends to utilize a two-pronged approach.
Firstly, the U.S. government has developed a framework for individuals and organizations to safely and responsibly develop digital assets. This includes addressing the risks they pose as well as highlighting poor practices within the crypto industry.
Secondly, agencies have been mandated to increase enforcement and develop new regulations where needed. While there’s an increase in public awareness programs designed to help consumers understand the risks of buying cryptocurrencies.
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The White House also pointed out that Congress had a major role in expanding regulators’ powers and passing transparency laws for cryptocurrency companies. It also warned about passing legislation that would reverse the current gains and tie cryptocurrency with the U.S. financial system.
In addition, the government intends to commit significant resources toward digital assets research and development, and this would help technologies power digital currencies and protect investors by default.
Crypto Industry Still Reeling From FTX Collapse
The crypto industry is still recovering from the bearish markets resulting from several CeFi platforms’ high-profile collapses. 3AC, Voyager, BlockFi, and FTX were among the top platforms to file for bankruptcy, with the quartet holding more than $100 billion in assets.
The nature of FTX collapse brought about increased scrutiny of the crypto industry. Congress testimonials exposed the risk-averse nature of crypto companies’ executives as details emerged that Sam Bankman-Fried misused clients’ funds through his trading firm Alameda Research.
The ripple effect was massive as several individuals and firms exposed to the platform suffered huge losses, with some companies forced to shut down. These events caused concerns and reactions from within and outside the crypto space. It is, therefore, unsurprising that the U.S. government is looking to tighten its grip on regulations.
Related Reading: Crypto-Friendly Bank Silvergate Suspends Dividend Payouts
Months after the FTX crash, there’s still increased skepticism about the crypto industry. There’s an increase in the amount of bitcoin withdrawn from exchanges, and earlier this month crypto bank, Silvergate revealed that clients withdrew almost $8 billion of their crypto deposits.
Featured image from Pixabay, chart from TradingView.com