WASHINGTON • A US regulatory panel has called for watchdogs to closely monitor risks created by financial innovation, warning that "fintech" and virtual currencies such as bitcoin threaten to disrupt the traditional financial services industry.
The comments on Thursday from the Financial Stability Oversight Council (FSOC), which monitors potential risks to the financial system, offers a further sign that regulators are looking to bring the likes of bitcoin, online lenders, and distributed ledger technology under their purview.
Concerns over a bubble in the global bitcoin market reached fever pitch this week after the virtual currency raced to another record high of US$19,500 (S$26,260) on Tuesday.
"New applications of technology... can be disruptive and can create risks and vulnerabilities that are difficult to anticipate," the FSOC wrote in its annual report.
"Accordingly, the Council encourages financial regulators to continue to identify and study new products and services... monitor how they affect consumers, regulated entities, and financial markets and coordinate regulatory approaches."
The report also proposed beefing up cyber-security rules, urging Congress to pass laws allowing financial regulators to oversee third-party service providers in that space.
The financial industry has been watching closely to see how the FSOC will be transformed under the administration of United States President Donald Trump, who has pledged to reduce financial regulations to promote economic growth.
In its first annual report since Mr Trump took over, the FSOC, which is made up of top US financial regulators, broadly embraced this promise, calling on its member watchdogs to trim rules wherever possible while still monitoring potential future risks.
"Council member agencies should, where possible and without reducing the resilience of the financial system, continue to address regulatory overlap and duplication, modernise outdated regulations, and... tailor regulations based on the size and complexity of financial institutions," the report stated.