WASHINGTON—A U.S. regulatory panel is calling for better monitoring of risks created by financial innovation, warning that “fintech” and virtual currencies such as Bitcoin threaten to disrupt the traditional financial services industry.
“The comments from the Financial Stability Oversight Council (FSOC), which monitors potential risks to the financial system, offers a further sign that regulators are looking to bring the likes of bitcoin, online lenders, and distributed ledger technology under their purview,” Reuters stated, adding that concerns over a bubble in the global bitcoin market escalated last week after the virtual currency raced to another record high of $19,500.
“New applications of technology...can be disruptive and can create risks and vulnerabilities that are difficult to anticipate,” the FSOC wrote in its annual report.
“Accordingly, the Council encourages financial regulators to continue to identify and study new products and services...monitor how they affect consumers, regulated entities, and financial markets and coordinate regulatory approaches,” Reuters reported.
The report also proposed beefing-up cybersecurity rules, urging Congress to pass laws allowing financial regulators to oversee third-party service providers in that space, Reuters reported.
“The financial industry has been watching closely to see how the FSOC will be transformed under the administration of Republican President Donald Trump, who has pledged to reduce financial regulations to promote economic growth,” Reuters stated. “In its first annual report since Trump took over, the FSOC, which is made up of top U.S. financial regulators broadly embraced this promise, calling on its member watchdogs to trim rules wherever possible while still monitoring potential future risks.”