Treasury Secretary Yellen says the regulatory frameworks for crypto assets in the U.S. should “support responsible innovation while managing risks.” She emphasized, “Regulation should be based on risks and activities, not specific technologies.”
Treasury Secretary Yellen on Crypto Regulation
U.S. Treasury Secretary Janet Yellen talked about crypto regulation Thursday at American University’s Kogod School of Business Center for Innovation.
“Digital assets may be relatively new, but they are part of a larger trend – the digitization of finance – that has been in the making for decades,” she began.
Yellen mentioned a wide range of topics relating to bitcoin and other cryptocurrencies, including how Bitcoin got started, Satoshi Nakamoto, the Bitcoin white paper, decentralized peer-to-peer systems, the double-spend problem, bitcoin’s volatility, and crypto adoption. Moreover, she referenced President Joe Biden’s recent executive order on the regulation of crypto assets.
The treasury secretary proceeded to share some lessons that “apply as we navigate the opportunities and challenges posed by these emerging technologies,” she described, adding that one of the lessons is “When regulation fails to keep pace with innovation, vulnerable people often suffer the greatest harm.”
She also discussed stablecoins. “Of course, stablecoins are just one piece of a much larger ecosystem of digital assets,” Yellen said, elaborating:
Our regulatory frameworks should be designed to support responsible innovation while managing risks — especially those that could disrupt the financial system and economy.
“As banks and other traditional financial firms become more involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities,” she detailed. “And, new types of intermediaries, such as digital asset exchanges and other digital native intermediaries, should be subject to appropriate forms of oversight.”
Furthermore, Yellen opined:
Regulation should be based on risks and activities, not specific technologies.
“When new technologies enable new activities, products, and services, financial regulations need to adjust,” she stressed. “But, that process should be guided by the risks associated with the services provided to households and businesses, not the underlying technology. Wherever possible, regulation should be ‘tech neutral.’”
In March, Yellen admitted that crypto has benefits, noting that the Treasury is working on crypto regulation. “Crypto has obviously grown by leaps and bounds and it’s now playing a significant role, not really so much in transactions, but in investment decisions of lots of Americans,” she said.