Yellen warns crypto invites risks that could ‘disrupt the financial system and our economy’ in first major speech on digital assets
“The Federal Reserve sees potential benefits from these innovations,” said Yellen In her first major speech on digital assets. She also warned the public that we did not yet fully understand all of the implications of having such large pools move so freely in our economy or what might happen if they were suddenly constricted.
Yellen warns crypto poses risks that could disrupt the financial system and our economy.
Among the goals of the crypto economy, according to the secretary of the Treasury, is to improve the U.S. payments system.
In her first major address on crypto assets Thursday morning, Treasury Secretary Janet Yellen argued that financial regulators must seriously consider the risks posed to consumers and the broader economy by digital assets.
In her speech at American University’s Kogod School of Business Center for Innovation, Yellen told an audience that digital assets may be new, but the issues they present are not. In the past, we have benefited from innovation as well as experienced unintended consequences.
According to Yellen, it is the government’s responsibility to “support” and “ensure responsible innovation” by tweaking rules to accommodate new technologies, but that businesses that provide similar services are regulated in the same way, no matter what technologies power them.
No matter whether assets are recorded on a balance sheet or a distributed ledger, consumers, investors, and businesses should be protected from fraud and misleading statements, Yellen said. “And taxpayers should receive the same type of tax reporting on digital asset transactions as they do on stock and bond transactions, so they have the necessary information to report their income to the IRS.”
A Treasury official who briefed reporters on Yellen’s remarks said she expressed hope the digital-asset sector would help promote innovation in the payments industry, which she views as “too slow, costly, and not sufficiently inclusive.”
“We’re considering a variety of options for payment systems, including digital assets, stablecoins, as well as a potential [central bank] digital currency,” the official said.
USD Coin USDCUSD, 0.00% and tether USDTUSD, 0.01% are stablecoins that peg their value to the U.S. dollar DXY, 0.12%. These stablecoins are used by crypto investors to trade in and out of various digital assets such as bitcoin BTCUSD, 0.01% and ether ETHUSD, 1.56% and as a stable store of value for uninvested crypto assets.
As a medium of payment, stablecoins are seen as superior by some because users are more willing to spend an asset that isn’t subject to the sort of volatility seen in other cryptocurrencies.
An executive order signed by President Joe Biden nearly a month earlier required federal agencies to review their policies related to cryptocurrencies and other digital assets.
An executive order signed by President Joe Biden nearly a month earlier required federal agencies to review their policies related to cryptocurrency and other digital assets, and the Securities and Exchange Commission has been working on registering large cryptocurrency exchanges.
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