Washington is closely monitoring the cryptocurrency sector after crypto lender Celsius Network ran into severe liquidity problems this week.
Celsius, one of the largest lenders in the crypto industry, suspended all customer withdrawals and transfers on Sunday. By Monday, the broader crypto market experienced a sharp downturn that pushed major digital assets to price levels not seen since 2020.
The CEL token fell to as low as $0.15 during the sell-off before recovering to highs above $0.56.
Trading data from CoinGecko shows the CEL/USD pair recovered roughly 70% of its losses within 24 hours.
Stablecoin-focused regulation
A report published by Yahoo Finance on Tuesday notes that the recent turmoil around Celsius, following the earlier collapse tied to TerraUSD, has drawn the Biden administration’s attention.
Lawmakers in Washington are reportedly considering whether proposals aimed at stablecoin oversight should be expanded to cover the broader cryptocurrency market.
Specifically, officials are reviewing the President’s Working Group report on stablecoins and weighing how its recommendations might be applied across the entire crypto industry.
Increased scrutiny of exchanges
An anonymous White House official told reporters that the LUNA collapse and Celsius’s difficulties have put the sector under intense scrutiny.
Officials are exploring measures regulators could take to mitigate the risks revealed by these events.
This potential increase in regulatory attention comes as U.S. lawmakers consider placing oversight of crypto exchanges under the Commodity Futures Trading Commission (CFTC).
Proposed regulatory requirements under discussion include prohibitions on exchanges lending out customer assets, adherence to liquidity and capital standards, and rules requiring exchanges to keep customer funds separate from the company’s own assets.