Treasury Secretary Janet Yellen has made her first speech on crypto in Washington on April 7, and it was not all bad news.
Ms. Yellen echoed sentiments from some of her fellow government leaders, such as Securities and Exchange Commission chair Gary Gensler that crypto regulation should focus on investor protection and minimizing risks.
Contrary to the crypto castigation that was expected, the stance was neutral but much focused on the risks involved with such volatile assets.
“This growth in digital services has opened a world of possibilities and risks that would have seemed fantastical only a few decades ago,”
Ms. Yellen called for “tech neutral” innovation and maintained that the overall framework needs to be based on risks rather than specific technologies.
“The government’s role should be to ensure responsible innovation – innovation that works for all Americans, protects our national security interests and our planet, and contributes to our economic competitiveness and growth,”
Don’t hold your breath for a CBDC
The Treasury Secretary dedicated a lot of time to central bank digital currencies, and the outlook for a digital dollar was not so positive.
Ms. Yellen said that the government is researching the impact of a CBDC on monetary policy, national security, international trade, and utility for consumers. However, the former Federal Reserve chairwoman added that issuance is not likely any time soon:
“I can’t tell you yet what conclusions we will reach, but we must be clear that issuing a CBDC would likely present a major design and engineering challenge that would require years of development, not months,”
She did acknowledge that the current system was too slow and inefficient and America needs to make payments cheaper, faster, and more accessible.
“For many Americans, most transactions still take too long to settle,” she stated.
Without a CBDC in sight for years, and no rush to formulate a framework for cryptocurrencies to be used as payments, the U.S. is likely to be stuck with its antiquated systems for the foreseeable future.
Yellen on stablecoins
Ms. Yellen also addressed the issue of stablecoins which currently have a combined market capitalization of $186 billion.
Stablecoins raise a number of policy concerns including illicit finance, user protection, and systemic risk, Yellen noted. She added that current oversight is inconsistent and fragmented, commenting on the thorny issue of reserves and backing:
“Most issuers say they back their coins with traditional assets that are safe and liquid. This way, whenever you want to trade your stablecoin back into a dollar, the company has the money to make the exchange. But, right now, no one can assure you that will happen,”
Overall, the speech was a reiteration of what we already know, a regulatory framework is required, but at the moment it all appears to be a lot of hot air and very little action in the United States.