Biden to speed up crypto regulation as UN warns of induced recession
The Biden administration has urged Congress to speed up the rollout of a regulatory framework for crypto and digital assets, as a UN report warns of a Fed-induced global recession.
Pressure is mounting in the US to speed up the crypto regulatory process, and officials have warned that further delays could put investors at risk.
According to the Financial Times, the US Financial Stability Oversight Council issued a report on October 3 urging lawmakers to agree on the regulation of crypto spot markets. Officials close to the congressional negotiations said they were still “months away” from passing legislation, meaning nothing is likely to happen this year.
Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been fighting for the authority to regulate digital assets, with the former wanting to classify them as securities, which would be a major step backwards for the industry.
FSOC’s report, however, suggested cooperation between agencies to close loopholes that allow operators to find favorable rules. It said:
“Some crypto asset companies may have affiliates or subsidiaries operating under different regulatory frameworks, and no single regulator can have visibility into the risks across the entire business.”
Recession warning from the UN
The regulatory push comes as a damning UN report claims the central bank’s monetary policy could cause a global recession.
On October 3, the United Nations Conference on Trade and Development (UNCTAD) released a report saying that world economic growth will slow to 2.5% in 2022 and fall to 2.2% in 2023. The decline will cost the world around $17 trillion, with developing countries being hit the hardest, it says.
Central banks such as the Federal Reserve have aggressively raised interest rates “threaten to cut growth altogether and make life much more difficult for heavily indebted firms, households and governments,” it added.
US interest rate increases hit poorer households and economies the hardest. About 90 developing countries have seen their currencies weaken against the dollar this year, with a third of them hit by more than 10%, it reported.
Weaker currencies generally mean less money available for investment, including crypto. On the flip side, failing fiat could result in a pivot to crypto assets as a hedge against their own currency’s devaluation.
Good for America, bad for the world
A strong dollar exacerbates the cost of living and the food and energy crisis as it increases the price of imports in developing countries.
“This year’s interest rate hikes in the United States, for example, could cut $360 billion of future income for developing countries.”
The report concluded that large multinationals with significant market power “appear to have taken undue advantage of the current context to increase markups to increase profits,” at the expense of the world’s poorest nations.
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