Speaking on CNBC’s ‘Closing Bell’ show, recently-confirmed Treasury Secretary Janet Yellen said that Bitcoin regulation should be focused on investor protection.
Yellen pointed to Bitcoin’s volatility, and said that it had been this way in recent years. She stated that “regulating institutions that deal in Bitcoin, making sure that they adhere to their regulatory responsibilities, I think is certainly important.”
She also pointed to the need to ensure that Bitcoin is not used for “illicit transactions”.
The Yellen Era
How the Treasury Department will proceed with cryptocurrency is still unclear, given the lack of detail from Yellen to date on the matter. As head of the Federal Reserve, she was cool toward crypto overall. However, as she did in the CNBC interview, she pointed directly toward the use of Bitcoin in illicit transactions.
Yellen has also called for better cooperation with other government agencies regarding crypto regulation. A draft 114-page paper on the directions of the department under her helm was circulated during her Senate hearings. However, the draft gives little detail on this cooperation.
One area in which the Treasury Department will have to cooperate is in terms of a Central Bank Digital Currency (CBDC). However, a digital dollar is not a high priority, at the public level, for the Federal Reserve. As a former Chair of the Federal Reserve herself, Yellen showed little interest in creating a CBDC. Current Chair Jerome Powell has not shown greater urgency, and previously stated that “it is more important to get it right than to be first”.
Yellen will need to come to terms with a Securities and Exchange Commission that is changing direction. Yellen’s declaration regarding closer cooperation resonates with SEC’s own ‘Crypto Mom’, Commissioner Hester Pierce. In an interview on Feb. 14, Pierce called for clarity and greater uniformity in Washington’s regulation of cryptocurrency.
The SEC faces the aftereffects of a last-minute action by then-outgoing Commissioner Jay Clayton, who initiated a suit against Ripple and two of its CEOs for the sale of a total of $1.8 billion in unregistered securities.
Ripple CEO Brad Garlinghouse maintains that the company already has a government ruling that it is not a security. In fact, Ripple’s XRP token is licensed now under the State of New York as a digital currency. However, the SEC has not ruled on XRP, so the hodge-podge of regulation could still leave Ripple in trouble.
In the CNBC interview, Secretary Yellen focused on the latest round of COVID-related economic stimulus. The economic effect of the pandemic will remain her priority, but cryptocurrency issues are certain to rise under her tenure.