The US government is set to tighten regulations to mitigate the growing risks associated with the cryptocurrency industry. This development follows increased scrutiny in the wake of the collapse of FTX and Terra Luna in 2022.
in press release On January 27, the White House rolled out a comprehensive roadmap designed to protect investors and hold bad actors to account. The roadmap highlights several measures for more effective regulation in the cryptocurrency industry.
A two-pronged approach by the US government
The US government revealed that it has spent the past 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 securely and responsibly develop digital assets. This includes addressing the risks they pose as well as highlighting bad practices in the cryptocurrency industry.
Second, the agencies are empowered to increase enforcement and develop new regulations when needed. While there is an increase in public awareness programs designed to help consumers understand the risks of buying cryptocurrencies.
Related reading: Federal regulators in the United States warn against cryptocurrency activities
The White House also noted that Congress has a key role to play in expanding the powers of regulators and passing transparency laws for cryptocurrency companies. He also warned against passing legislation that would reverse current gains and tie cryptocurrency into the US financial system.
In addition, the government intends to devote significant resources to research and development of digital assets, and this should help the technologies to power digital currencies and protect investors by default.
The crypto industry is still reeling from the collapse of FTX
The crypto industry is still recovering from the bear markets caused by the high-profile crashes of several CeFi platforms. 3AC, Voyager, BlockFi, and FTX were among the top platforms to file for bankruptcy, with the quartet holding over $100 billion in assets.
The nature of the FTX crash has led to increased scrutiny of the cryptocurrency 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 has been massive as many individuals and businesses exposed to the platform have suffered massive losses, with some businesses being forced to close. These events have caused concerns and reactions from both inside and outside the crypto space. Therefore, it is not surprising that the US government is looking to tighten its grip on regulations.
Related reading: Crypto-friendly Silvergate Bank suspends dividend payments
Months after the FTX crash, there is still growing skepticism about the cryptocurrency industry. There is an increase in the amount of bitcoin withdrawn from exchanges, and earlier this month Crypto bank Silvergate revealed that customers have withdrawn nearly $8 billion from their crypto deposits.
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