Bridging the Crypto Oversight Gap: US Accountability Office Calls for Federal Regulators

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The United States Government Accountability Office (GAO) released a report, commissioned by Rep. Maxine Waters (D-Calif.) and Rep. Stephen Lynch (D-Mass.) of the Financial Services Committee, highlighting a regulatory gap concerning crypto assets. The report suggests a unified, comprehensive approach involving federal regulators to address this issue.

According to the report, there is currently no federal financial regulator with the authority to oversee the spot market for crypto assets that are not considered securities. To address this, the GAO recommends establishing a formal coordination mechanism, which could help federal financial regulators collectively identify risks associated with blockchain-related assets and develop appropriate responses in a timely manner.

In response to the regulatory gap, the Treasury’s Financial Stability Oversight Council has been assigned the responsibility of leading the development of a unified approach to overseeing crypto assets, based on a March 2022 Executive Order.

The report talks about stablecoin concerns

The report expresses particular concern about the regulatory authority over stablecoins, highlighting the fragmented nature of the U.S. financial regulatory structure. This fragmentation mainly relates to standards concerning reserve levels and the public disclosure of reserves. To address this issue, the report calls for regular audits and public disclosures of reserve assets and audit results, along with the establishment of a legal framework regarding redemption rights.

To effectively address these challenges, the report suggests that major U.S. financial regulators, including the Consumer Financial Protection Bureau (CFPB), the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System, the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC), should establish or adapt an existing formal coordination mechanism. This collaborative approach would enable the timely identification and response to risks associated with blockchain-related products and services.