Jay Shambaugh, the Under Secretary for International Affairs at the US Department of Treasury, delivered a speech today in front of the Institute of International Bankers’ conference. In the presentation, Shambaugh addressed a litany of hot topics that covered Fintech, including digital assets, as well as other current issues like climate disclosure.
Regarding digital assets or crypto, Shambaugh noted that aggregate value has sunk by nearly two-thirds during the crypto winter and surrounding the failure of multiple crypto firms.
He stated that digital assets bring both opportunities as well as challenges and regulating digital assets is a “broad and common one” that impacts both developing economies as well as more mature jurisdictions.
Shambaugh stated:
“… it has become clear that many crypto-asset trading platforms and crypto-asset hedge funds were engaged in very risky behavior and, in some circumstances, gross negligence or outright fraud. While crypto markets were growing, the firms appeared to make tremendous profits. But when markets turned, leveraged and interconnected firms pulled one another down. Many consumers who trusted crypto firms with their money—sometimes their life savings—were left with nothing.”
He added that while crypto has not spilled over into the broader financial environment, the failures and problems are “cause for deep concern.”
Shambaugh said that Treasury will continue to work with their partners, like the FSB and G20, to ensure regulation protects consumers as well as the broader financial services sector, while guarding against bad actors.
Digital financial services continue to bring benefits and new challenges as services move to the cloud and become ubiquitous. Shambaugh said they are dealing with these issues “head on” noting that one of the difficulties is the fragmented nature of regulation. He mentioned specifically cyber risks and ransomware as criminals are taking advantage of digital technology as well.
Shambaugh addressed the climate, stating that “climate change poses meaningful risks to our economy.”
Subtly supporting the SEC’s attempt to mandate climate disclosure, the Under Secretary said:
“We believe that climate-related disclosures are essential. They enable market participants to take climate-related risks and opportunities into account in their investment strategies. Treasury believes that by providing investors with reliable information, U.S. companies will be better able to attract capital and stay competitive in the global economy. “
Climate disclosure is a divisive issue in Congress as it is beyond the mandate of the SEC.
Non-Bank Financial Intermediaries, or NBFIs, received some attention. Shambauh stated that they “must continue to work on robust international standards to bolster the strength of the non-bank sector, while preserving its core functions and benefits.”
The outline of the speech provided a good look into Treasury’s ambitions for the next two years as we enter the next Presidential cycle.