Treasury Department set to warn White House of crypto regulation overhauls

Yahoo Finance reporter Jen Schonberger details an upcoming Treasury report that will highlight the economic danger of cryptocurrency.

Video Transcript

RACHELLE AKUFFO: All right, shifting gears now, the Treasury Department will be giving the White House a major warning about the need to regulate crypto. Yahoo Finance's Jennifer Schonberger has the details. So Jen, what can you tell us?

JENNIFER SCHONBERGER: Good afternoon, Rachelle. That's right. Treasury is set to warn in four forthcoming reports next week that the financial risks of cryptocurrencies outweigh the benefits, unless they are properly regulated, according to a person familiar with the matter. The reports, which come under the direction of President Biden's executive order, issued back in March on how to regulate cryptocurrencies will focus on the economic risks of crypto, including fraud.

And one of the reports in particular will focus on stablecoins. Though Treasury does not view crypto as posing a systemic risk yet to the financial system and the overall economy, that could be subject to change as the space grows. Stablecoins have been a large focus for the administration, especially in the aftermath of stablecoin Terra's collapse this spring that touched off a major selloff in crypto.

Last November, the administration recommended that only banks should be allowed to issue stablecoins, though more recently, the administration has said that the president's working group on financial markets is open to regulating stablecoin issuers through methods other than as insured depository institutions.

With a strong push for regulation, lawmakers on Capitol Hill are drafting and proposing various bills. Republicans and Democrats on the House Financial Services Committee have drafted legislation focused on regulating stablecoins, but remain at loggerheads over a provision on how to treat digital wallets.

A more comprehensive bill introduced this spring by senators Cynthia Lummis and Kyrsten Gillibrand would create definitions for digital assets, define which agencies have jurisdiction over crypto, and offer consumer protections and regulations for stablecoins. Treasury's reports are due out next week, and I will have more details on that for you then. Guys.