The US 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.
At press release on January 27, the White House put forward a comprehensive roadmap designed to protect investors and hold bad actors accountable. The roadmap highlights several steps for more effective regulation of the crypto industry.
A Two-Sided Approach by the US Government
The US government announced that it has spent the last two years identifying cryptocurrency risks and finding ways to mitigate them. To ensure these measures are implemented, the White House intends to use a two-pronged approach.
First, the US government has developed a framework for individuals and organizations to safely and responsibly develop their digital assets. This includes addressing the risks it poses as well as highlighting bad practices in the crypto industry.
Second, agencies have been tasked with increasing enforcement and developing new regulations as needed. While there is an increase in public awareness programs designed to help consumers understand the risks of buying cryptocurrencies.
Related reading: US Federal Regulators Warn About Crypto Activities
The White House also stated that Congress has a major role to play in expanding regulatory powers and passing transparency laws for cryptocurrency companies. It also warned about passing legislation that would reverse the current gains and tie cryptocurrency to the US financial system.
In addition, the government intends to allocate significant resources to the research and development of digital assets, and this will help the technology to power digital currencies and protect investors with standards.
The Crypto Industry Is Still Reeling From The FTX Collapse
The crypto industry is still recovering from the bearish market as several high-profile CeFi platforms collapsed. 3AC, Voyager, BlockFi, and FTX are among the top platforms to file for bankruptcy, with the quartet holding more than $100 billion in assets.
The nature of FTX’s collapse has sparked scrutiny of the crypto industry. Congressional testimony exposed the callous nature of crypto company executives as details emerged that Sam Bankman-Fried misappropriated client funds through trading firm Alameda Research.
The ripple effect was severe as some individuals and companies running the platform suffered huge losses, and some companies were forced to close. The event sparked concern and reaction from both inside and outside the crypto space. Therefore, it is not surprising that the US government wants to tighten regulations.
Related reading: Crypto-Friendly Bank Silvergate Suspends Dividend Payments
Months after the FTX crash, there is still skepticism about the crypto industry. There has been an increase in the number of bitcoins withdrawn from the exchange, and earlier this month crypto bank, Silvergate revealed that its clients withdrew almost $8 billion from crypto deposits.
Featured image from Pixabay, chart from TradingView.com