Janet Yellen talks about crypto, the central bank’s digital currency in her final remarks

Andrew Harnik/AP/Shutterstock / Andrew Harnik/AP/Shutterstock

Treasury Secretary Janet Yellen gave a speech on digital asset policy on April 7, making the case for responsible digital asset innovation while weighing the risks they can pose.

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Yellen discussed the principles that will guide the Treasury’s approach to digital asset policy development — and its work under President Biden’s executive order, “Ensuring Responsible Development of Digital Assets,” signed on 9 March.

“I won’t predict where this work will take us, but that doesn’t mean we’re sailing without a compass,” Yellen said at American University’s Kogod School of Business Center for Innovation. “Digital assets may be new, but many of the problems they present are not. We have experienced the benefits of innovation in the past, and we have also faced some of the unintended consequences.”

According to Ari Redbord — a former senior adviser to the US Treasury Department and now head of legal and governmental affairs at blockchain intelligence firm TRM Labs — Yellen’s speech was both comprehensive and far-reaching.

“She basically relied on Biden’s recent executive order to work out the issues in a more granular way,” Redbord told GOBankingRates. “She touched on stablecoins, the issuance of a central bank digital currency, and the need to monitor the cryptocurrency industry. That said, the speech was overwhelmingly positive.

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Redbord added that Yellen, like the Executive Order, focused on the need for global cooperation and talked about the idea of ​​responsible innovation.

“The speech was carefully written to thread the needle – on the one hand it emphasizes the need for regulation, but also highlights the need for American leadership in the world and the need to foster the responsible innovation,” he said. Redbord added that his remarks will be welcomed by the cryptocurrency industry, as they contribute to acceptance of emerging technology – and also recognition that we need to build the layer of trust for investors, a layer of confidence consisting of “anti-money laundering”. tools, consumer protection and stability.

Yellen said adoption of cryptocurrencies for payments may be slow due to their recent volatility combined with high fees and slower processing times than those associated with other forms of payment.

“In practice, you’d be hard pressed to use cryptocurrency to buy a sandwich or a gallon of milk,” she said. “Other digital assets – such as stablecoins or potential central bank digital currencies (CBDCs) – may succeed in being used more widely as a medium of exchange, increasing potential benefits and risks.”

Yellen said Biden’s executive order directs federal government experts to conduct in-depth analysis to balance the responsible development of digital assets with the risks they present. These tasks will be guided by six policy objectives: to protect consumers, investors and businesses; preserve financial stability from systemic risk; mitigate national security risks; promote US economic leadership and competitiveness; promote equitable access to safe and affordable financial services; and support responsible technological advances that take into account important design considerations such as those related to privacy, human rights and climate change.

“Over the next six months or so, Treasury will work with White House colleagues and other agencies to produce foundational reports and recommendations related to these goals. In many cases, the work entrusted by the Executive Order builds on ongoing efforts at the Treasury,” Yellen said.

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Regarding a CBDC, Yellen reiterated that under the order, the Biden administration will release a report analyzing possible design choices and their implications for payment systems, economic growth, financial financial inclusion and national security.

“I don’t know yet what conclusions we’ll come to, but we need to be clear that issuing a CBDC would likely present a major design and engineering challenge that would require years of development, not months.” , she said. “So, I share the president’s urgency to advance research to understand the challenges and opportunities a CBDC could present to American interests.”

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About the Author

Yael Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a VP/Senior Content Writer for major New York-based financial firms, including New York Life and MSCI. Yael is now independent and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Toulouse-Jean Jaurès University, France.

Sylvia B. Polson