Crypto markets have high levels of fraud, according to Treasury's financial stability watchdog

The Financial Stability Oversight Council, a government oversight body created after the 2008 financial crisis to identify and address risks to the financial system, released a report Friday that examines the potential implications of the recent collapse of digital currency exchange FTX.

The report found that the failure of FTX, a major crypto exchange platform, has had a limited impact on the broader U.S. financial system, despite raising red flags about the potential risks posed by crypto markets. The report highlighted the need for regulatory oversight of spot markets for crypto assets that aren't securities, and warned of the potential for an interconnected system between the crypto and traditional financial systems.

The council noted that there is a high rate of fraud and scams in the crypto markets, citing data from the Consumer Financial Protection Bureau, Federal Trade Commission, and the Securities and Exchange Commission. The report also urged Congress to pass legislation to enable U.S. regulators to police spot markets for crypto assets and to address regulatory arbitrage, where companies take advantage of more favorable or lighter regulations in multiple jurisdictions to circumvent tighter oversight in the U.S.

The Financial Stability Oversight Council's report highlights the need to closely monitor the growth of the crypto markets and regulate them to prevent potential systemic risks. It emphasizes the importance of appropriate oversight to protect investors and prevent fraud and abuse, while taking into account the potential benefits of crypto assets to the broader financial system.


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