Treasury Secretary Jane Yellen says that the collapse of the cryptocurrency exchange FTX was a “Lehman moment” for the industry.
Key Details
- Secretary Yellen describes cryptocurrencies as “very risky assets” at the New York Times DealBook Summit today.
- She says she is thankful that recent activity involving extremely volatile movements had not leaked into the mainstream banking sector.
- “I have been skeptical, and I remain quite skeptical,” Secretary Yellen says.
Why It’s News
The comments came amid growing concerns about the risks of investing in digital assets and as lawmakers have been calling for more regulation of the industry.
The Biden administration has been studying digital assets—and it, the Securities and Exchange Commission, and Congress have been looking at ways to develop a new regulatory framework.
In her talk today, the treasury secretary praised banking regulators for having been careful when it came to cryptocurrencies.
“It’s a Lehman moment within crypto,” Yellen says, referring to the investment bank that filed for bankruptcy in 2008. “And crypto is big enough that we’ve had substantial harm to investors and particularly people who aren’t very well informed about the risks that they’re undertaking, and that’s a very bad thing.”
Backing Up a Bit
Yellen says it is important to be open to financial innovation—offering some praise of cryptos—noting that the blockchain technology behind cryptocurrencies can provide faster and cheaper transactions.
“I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation, and it doesn’t,” the secretary told the New York Times’ Andrew Ross Sorkin today.
Yellen told Sorkin that she was surprised by the downfall of FTX and that she did not personally know Sam Bankman-Fried, the CEO of the failed crypto exchange FTX who collapse sent waves through the industry and markets.
“I’ve never met with him,” Yellen says. “I think I won’t begin right now, either.”