Yellen will establish Principles for Regulation of Digital Assets. Treasury chief backs innovation with public protections.
Janet Yellen, Treasury Secretary, stated that a digital currency would take many years to create if the U.S. decided to go ahead with it. This is a deliberate approach taken by American policymakers as they develop their regulatory plans to deal with the rapid spread digital assets.
The U.S. regulators have begun a six-month-long review to come up with recommendations about a range of issues related to digital assets. This includes a digital version U.S. sovereign money. The President Joe Biden issued an executive order to launch the initiative.
In prepared remarks for a Washington event, Yellen stated that while I don’t know what conclusions we will reach, it is clear that issuing a CBDC could present a major design challenge that would require years and not months of engineering. CBDC is a central bank digital currency – for the U.S. it’s a digital dollars.
In her speech, Yellen outlined a series of principles she believes should guide the development of a new framework to regulate digital assets. This will encourage innovation and protect investors, consumers, and financial stability.
Yellen stated that “our regulatory frameworks should support responsible innovation while managing risk — especially those which could disrupt the financial sector,”
She stressed that regulators must be “tech neutral” as they strive to keep pace with innovation.
She said, “That process should not be guided by technology but the risks associated with services provided to households or businesses.”
She stated that digital asset issuers and service providers in this sector need to protect investors and consumers from fraud, ensure proper custody and provide accurate tax reporting information.
This speech comes after a March executive orders that directed a number federal agencies, including Treasury, to pay more attention to the regulation and study of digital assets. These can include a variety of crypto coins like Bitcoin and fixed-value stablecoins.
Continue reading: Biden Calls for a Coordinated Approach to Crypto Oversight
Yellen said that policymakers should be ready for potential changes in the structure of financial markets. He cited potential changes caused by distributed ledger technology.
She stated that while this may make markets more resilient to the collapse of any firm, it was crucial to maintain visibility into possible systemic risks and have effective tools to deal with them when they occur.