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A panel of US financial regulators is calling on Congress to regulate spot cryptocurrency markets.

The Financial Stability Oversight Council, made up of the heads of the US Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board and other top regulators, released its annual report this week.

The board says crypto assets, which are not securities, have limited federal regulations and is calling on Congress to fix that.

“As a result, these markets cannot be subject to a regulatory framework designed to ensure orderly and transparent trading, prevent conflicts of interest and market manipulation, and protect investors and the financial system more broadly. To address this regulatory gap, the Council recommends that Congress enact legislation that would provide federal financial regulators with the authority to set clear rules for cryptoassets that are not securities. The Board recommends that this rule-making body should not interfere with or weaken the existing powers of market regulators. Legislation should provide for enforcement and investigative powers to ensure compliance with these rules.”

The Board also believes that crypto may present financial stability risks.

“A number of crypto-asset trading platforms have offered retail clients direct access to the markets by vertically integrating services provided by intermediaries such as broker-dealers or futures commission traders. Risks to financial stability and investor protection may arise from exposure of retail investors to certain practices often offered by vertically integrated trading platforms, such as automatic and rapid closing of client positions. Therefore, the Board recommends that member agencies assess the impact of potential vertical integration by cryptoasset firms.”

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