The US government plans to tighten regulations to mitigate the growing risks of the crypto industry. This development comes after increased attention following the collapse of FTX and Terra Luna in 2022.
In a press release on January 27, the White House presented a comprehensive roadmap to protect investors and hold bad actors accountable. The roadmap highlighted several measures for more effective regulation in the crypto industry.
A two-pronged approach by the US government
The US government has revealed that it has 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 plans to take a two-pronged approach.
First, the US government has developed a framework for individuals and organizations to safely and responsibly develop digital assets. This includes addressing the risks they pose and highlighting bad practices within the crypto industry.
Second, agencies have been mandated to strengthen enforcement and develop new regulations where necessary. While there is an increase in public awareness programs designed to help consumers understand the risks of purchasing cryptocurrencies.
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The White House also pointed out that Congress played an important role in expanding the powers of regulators and passing transparency laws for cryptocurrency companies. It also warned against passing legislation that would reverse current gains and tie cryptocurrency to the US financial system.
In addition, the government plans to dedicate significant resources to research and development of digital assets, 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 due to the high-profile collapses of several CeFi platforms. 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’s collapse brought more scrutiny to the crypto industry. Congressional testimony exposed the risk-averse nature of crypto company executives as details emerged that Sam Bankman-Fried misused client funds through his trading firm Alameda Research.
The ripple effect was huge as several individuals and companies exposed to the platform suffered huge losses, with some companies forced to close. These events generated concerns and reactions from inside and outside the crypto space. It is therefore not surprising that the US government wants to tighten its grip on regulation.
Related Reading: Crypto-friendly bank Silvergate suspends dividend payments
Months after the FTX crash, there is still more skepticism about the crypto industry. There has been an increase in the number of bitcoins being withdrawn from exchanges, and earlier this month crypto bank, Silvergate revealed that customers had withdrawn nearly $8 billion from their crypto deposits.
Featured image from Pixabay, chart from TradingView.com