Janet Yellen, U.S. Treasury Secretary, expressed her concern about Saturday’s implosion at FTX in an interview with Bloomberg. She stated that FTX’s failure reinforced her belief that crypto markets require’very careful regulation’ and that it’shows the weaknesses of the entire sector.

Yellen compared crypto-markets to developed financial markets that have better investor protection rules.

You would need to segregate customer assets in order to operate other regulated exchanges. It is not permissible to borrow customer deposits to an unregulated exchange to make risky, leveraged investments.

She said that it is not yet deeply integrated with our banking system and doesn’t pose a greater threat to financial stability. However, she warned that the FTX disaster could have been worse if digital assets had been more embedded in the financial sector.

Fed Vice Chair: Crypto Needs Strong Regulatory Guardrails

In an interview with Bloomberg Monday, Lael Brainard, Vice Chair Federal Reserve, also stressed the importance strong crypto regulation.

She pointed out that crypto finance has been exposed to the same risk as traditional finance, and should therefore be subject to the exact same regulations. Brainard reiterated her long-held belief that crypto finance requires strong regulation.

It is really alarming to see how retail investors are suffering from these losses.

Vice chair of the Federal Reserve added that despite all the hype, these markets are highly concentrated and highly interconnected. You are only seeing a domino effect with failures from one platform spilling into another. She concluded:

This reinforces my belief that crypto finance, which is not different from traditional finance in terms of the risks it exposes, should be subject to the regulatory perimeter. Strong regulatory safeguards are needed.

A growing number of legislators are calling for tighter crypto regulation after the bankruptcy filing of FTX. Gary Gensler (chair of the U.S. Securities and Exchange Commission) has warned the crypto industry is’significantly noncompliant’. The White House and several U.S senators also called for proper crypto oversight last week.