In a pivotal address before Congress today, US Treasury Secretary Janet Yellen has underscored the urgent need for regulatory oversight in the rapidly expanding cryptocurrency market. Yellen’s prepared remarks, released ahead of her appearance before the House Financial Services Committee, shed light on the mounting risks posed by digital assets to the broader financial system.

Amidst a landscape fraught with uncertainty, Yellen’s focus rests squarely on the potential dangers lurking within the crypto sphere. She highlights the critical role of the Financial Stability Oversight Council (FSOC), which she leads, in conducting a comprehensive evaluation of the risks associated with digital assets. From the specter of runs on crypto platforms to the unsettling volatility of crypto-asset prices, Yellen’s testimony paints a sobering picture of the challenges ahead.

Of particular concern are stablecoins, a type of digital currency pegged to a stable asset like the US dollar, and the unregulated spot market for crypto-assets that are not considered securities. Yellen emphasizes the imperative for legislative action to rein in these burgeoning sectors, calling on Congress to enact laws that would provide much-needed oversight and regulation.

Yellen’s focus is on the comprehensive assessment of financial system risks, with a particular emphasis on the issues arising from digital assets. She highlights the Financial Stability Oversight Council’s (FSOC) dedication to examining risks related to digital assets, including potential runs on crypto-asset platforms, vulnerabilities stemming from price volatility, and the proliferation of platforms operating outside or in violation of applicable laws and regulations.

The Treasury Secretary’s statement underscores the government’s escalating concerns regarding the stability and regulatory compliance of the cryptocurrency market. Her testimony comes at a critical juncture for the industry, grappling with high-profile setbacks, notably the collapse of the FTX exchange. Yellen previously likened this event to the “Lehman moment” for crypto, drawing parallels to the 2008 financial crisis.

The urgency of Yellen’s plea is palpable, especially in the wake of recent high-profile setbacks within the crypto industry. The collapse of the FTX exchange looms large in her remarks, with Yellen drawing parallels to the seismic shocks of the 2008 financial crisis. For Yellen, this is a pivotal moment akin to the “Lehman moment” for crypto—a stark reminder of the fragility inherent in an unregulated market.

Yellen’s testimony delves into five primary areas identified by the FSOC, each representing a distinct facet of the financial landscape. From the traditional banking sector to the disruptive forces of artificial intelligence, the FSOC’s purview encompasses a broad spectrum of risks. Yet, it is the inclusion of digital assets as a focal point that underscores the gravity of the situation—a recognition of the profound impact crypto could have on global financial stability.

As the crypto industry grapples with its own existential crisis, Yellen’s call to action resonates with a sense of urgency. The need for regulatory clarity has never been more pressing, as investors and regulators alike seek to navigate a landscape fraught with peril. With billions of dollars at stake and the specter of systemic risk looming large, the time for decisive action is now.

In the days and weeks ahead, all eyes will be on Congress as lawmakers weigh the merits of Yellen’s proposals. The fate of the crypto industry hangs in the balance, its future uncertain amidst a sea of regulatory scrutiny. Yet, amidst the uncertainty, there is hope—a belief that through collaboration and collective action, we can forge a path towards a more stable and secure financial future.