Janet Yellen says FTX collapse shows cryptocurrencies are “risky… even dangerous” investments

Treasury Secretary Janet Yellen has informed CBS News that the spectacular collapse of cryptocurrency alternate FTX, which despatched shockwaves by means of the crypto world final week with its chapter submitting, ought to function a warning to Americans about investing their money in “extremely risky” monetary merchandise traded in a space missing “appropriate supervision and regulation.”

FTX, one of many world’s largest cryptocurrency exchanges, crumbled within the space of solely about one week, and each the company and its former CEO, Sam Bankman-Fried, are now being investigated in the U.S. and different nations for potential securities violations. While the fallout from FTX’s collapse has largely been restricted to the crypto finance markets, Yellen joined a rising refrain of consultants and officers world wide suggesting the digital forex trade ought to face extra regulation.

“I think this is a space where investors and consumers should really be very careful,” Yellen informed CBS News correspondent Nancy Cordes in a wide-ranging interview in Bali, the place the Treasury Secretary was attending the G20 summit alongside President Biden. SHe  

“We have very strong investor and consumer protection laws for most of our financial markets, but in some ways the crypto space has inadequate regulation.”

U.S. Treasury Secretary Janet Yellen, left, speaks with CBS News congressional correspondent Nancy Cordes in Bali, Indonesia, November 15, 2022, on the sidelines of the G20 summit.

CBS News

Yellen stated the Biden administration had highlighted “regulatory holes that need to be filled for this to be a space where Americans can feel safe doing business,” and blamed the “absence of appropriate supervision and regulation” for the FTX collapse.

Yellen confused that she was not in a position to supply Americans particular recommendation on how they need to or mustn’t make investments their money, however she referred to as cryptocurrencies “extremely risky assets, and even dangerous in some ways,” and urged individuals to “be extremely careful about their activities in this space.”

FTX’s collectors will likely be first in line to obtain no matter belongings a chapter decide deems applicable to distribute because the company seeks to restructure as a part of its Chapter 11 submitting. Investors within the Bahamas-based company, which had raised some $2 billion in enterprise capital, will likely be second in line. That means FTX account holders, who used the platform to commerce bitcoin, solana and different digital currencies, might need to wait years to get their money again – in the event that they ever do.

A “strong, resilient economy” vs inflation

The Treasury chief described the U.S. economic system general as robust and resilient and stated she anticipated inflation to ease over the approaching year with loads of jobs on supply for Americans, however she warned that the worldwide image remained “uncertain.”

“Many countries are really suffering from high energy and food prices, and we have those strains ourselves, but we have a strong, resilient economy,” Yellen informed Cordes, calling the U.S. labor market “exceptionally strong.”

Inflation confirmed indicators of slowing in October


“We continue to create jobs at a very solid pace. Unemployment at almost 50-year lows, and two job openings for every American who’s looking for work,” she stated, calling the financial circumstances for nation’s households, banks and companies “by and large solid.”  

“I expect inflation to come down over time, and Americans are rightly concerned about that, but I believe they’ll be feeling better about it,” she stated.

Diesel “shortages and low inventories”

One factor that would work towards the U.S. inflationary rebound this winter is a restricted provide of diesel gas, which is used each to warmth buildings and to maneuver just about all the pieces Americans purchase across the nation. Diesel powers most freight trains and vehicles, and a worldwide scarcity of the gas has seen costs climb greater than 40% during the last year, and so they’re nonetheless rising.

One main U.S. provider’s warning of a “shortage” on the East Coast earlier this month sparked rumors that the gas may even run out.

While U.S. inventories of diesel are decrease than they’ve been since 1982, power market consultants informed CBS MoneyWatch the tight provides had been no cause to panic, and the U.S. was not going to expire — at the least not within the coming weeks, and never until the worldwide provide chain fully broke down. 

Indonesia G20
U.S. Treasury Secretary Janet Yellen attends the G20 Finance and Health Ministers Meeting in Bali, Indonesia, November 12, 2022.

Made Nagi/Pool Photo/AP

Yellen shared that optimism, however cautiously. Asked by Cordes if the U.S. had sufficient diesel to get by means of the winter, she stated: “Hopefully, I believe there will be,” however acknowledged there can be “some shortages and low inventories” on the East Coast.

“Hopefully we won’t see a further increase — prices have gone up and we’re monitoring the situation very closely,” she informed Cordes, including that the Biden administration has “had conversations with the oil companies about it.”

Shift to EVs “reliant on China”?

President Biden has spoken so much about his ambition to see half of the autos on U.S. roads powered by electrical energy, not fossil fuels, by 2030, however the Pentagon lately referred to as China’s dominance of the electrical automobile (EV) battery market a serious problem to that purpose.

Most of the uncooked supplies used to make lithium-ion automobile batteries are produced by China, and Yellen acknowledged that the U.S. and its auto trade have “been reliant on China” up to now.

Biden unveils $900 million electrical automobile plan


The Treasury Secretary stated the Inflation Reduction Act permitted by Congress over the summer time “contains incentives and provisions that are intended to change that and to diversify our supply chains for battery components.”

“They are very strong incentives for investment in these minerals in the United States and other allies, so we have a heavy focus on that,” Yellen stated, including that from subsequent year corporations that assemble EVs in North America will likely be “required to source around 40% of minerals, or mineral processing, in the United States or other countries that we have free trade areas with, so over time I expect the situation to change and we will become less reliant on China.”  

CBS MoneyWatch’s Kristopher J. Brooks and Megan Cerullo contributed to this report.

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