The Biden administration is calling on Congress to finally pass a regulatory framework for cryptocurrencies and digital assets. In addition, a UN report warns of a Fed-triggered global recession.
Pressure is mounting in the US to speed up the process of crypto regulation. Government officials even warn that further delays could put investors at risk.
According to the Financial Times, the US Financial Stability Oversight Council (FSOC) released a report on October 3 calling on lawmakers to adopt consensual rules for the crypto spot markets. Government officials familiar with the matter say they are months away from passing legislation, so little is likely to change this year.
Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been fighting over the power to regulate crypto. The former would like to classify the digital assets as securities, which in turn would mean a major step backwards for the industry.
The FSOC report, on the other hand, suggested cooperation between agencies. This should close any beneficial loopholes for blockchain operators.
So it says:
“Some companies with cryptoassets may have subsidiaries or branches that operate under different regulatory frameworks. As a result, individual regulators may not have an overview of the risks to the entire company.”
Crypto regulation and recession warning from the UN
At the same time as the regulatory push, the UN published a damning report. It said the central bank’s monetary policy could cause a global recession.
The report from the United Nations Conference on Trade and Development (UNCTAD) on October 3 predicts a slowdown in global economic growth in the coming years. Growth is expected to fall to 2.5% already in 2022 and to 2.2% in 2023. This recession will cost the world about $17 trillion, according to the report, and will hit developing countries the hardest.
Central banks such as the Federal Reserve have aggressively raised interest rates this year. These banks “threaten to completely slow down economic growth, making the situation significantly more difficult for heavily indebted companies, households and governments,” it said.
Bold interest rate hikes hit poorer households and economies the hardest. About 90 developing countries have seen their currencies weaken significantly against the US dollar this year – a third of those countries by more than 10%, the report said.
On the one hand, a weaker currency also generally means less money for investments, including cryptocurrencies. On the other hand, the failure of fiat currencies may lead to more focus on cryptocurrencies as a hedge against depreciation.
Good for the US, bad for the world
A strong US dollar increases import prices for developing countries and thus the cost of living there. Therefore, the global food and energy crisis is also getting worse.
“This year’s interest rate hikes in the United States, for example, could add $360 billion in future income to developing countries,” the report said.
In conclusion, the FSOC points to large multinational companies with significant market power that “appear to have taken undue advantage of the current situation. They increased premiums to increase their profits” at the expense of the world’s poorest countries.
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