Treasury report warns cryptocurrencies could destabilize U.S. finances
Various cryptocurrencies have skyrocketed in value in recent years.
The Department of the Treasury on Monday issued a report warning that cryptocurrency prices are driven largely by market speculation and lack solid financial backing.
The Financial Stability Oversight Council (FSOC), which issued the report identified "an important emerging vulnerability" in the viral financial assets, according to The Hill.
"Crypto-asset prices appear to be primarily driven by speculation rather than grounded in current fundamental economic use cases, and prices have repeatedly recorded significant and broad declines," the report read. "Many crypto-asset firms or activities have sizable interconnections with crypto-asset entities that have risky business profiles and opaque capital and liquidity positions."
Cryptocurrencies, it further asserted, "could pose risks to the stability of the U.S. financial system" in the absence of regulation or the implementation of significant safeguards.
Various cryptocurrencies have skyrocketed in value in recent years, driving a financial and social media craze for the digital tokens so enveloping of markets that even social media platform Facebook attempted to launch one.
The digital currencies are notorious for their volatility. Coinbase, for example, reported a $1.1 billion net loss in the second quarter of 2022. It had earned $1.6 billion in net profit in the same period of 2021. Moreover, the currencies are vulnerable to foreign hacking efforts and other fraud.
Influencer Kim Kardashian landed in hot water on Monday over her promotion of EthereumMax, agreeing to pay a $1.26 million fine for not disclosing her paid promotion of the currency.