As an extension of President Joseph Biden’s Executive Order on Digital Assets, U.S. Secretary of the Treasury Janet Yellen provides remarks on digital assets policy at American University, Kogod School of Business Center for Innovation, on April 7, 2022.
The Secretary gave the brief history of Bitcoin including invocation of the name Satoshi Nakamoto.
She offered 5 lessons to apply for digital assets:
- US financial system benefits from responsible innovation – Sec. Yellen noted the improvements which could be made by increasing the speed of financial transactions and that it is, in effect, a tax on people who send money. She said she’s aware that this is the promise of digital assets but remains skeptical on whether they are the answer. She said in 2023, “Fed Now” will launch allowing real-time payments within the United States payment system. Sec. Yellen also hopefully noted the potential use of a Central Bank Digital Currency (CBDC) and furthermore pointed to how innovation with digital assets can help.
- When regulation fails to keep pace with innovation, vulnerable people suffer. Secretary Yellen pointed to the Great Financial Crisis in 2008 and the “shadow banks” which precipitated suffering for vulnerable populations. She said the US needs to prevent such an occurrence with digital assets. For her, stablecoins present a challenge in that “a run” could be possible. The suggestion is that stablecoins need appropriate regulations to make them helpful – she included exchanges in this bucket as well. She said, “Whenever possible, regulation should be tech neutral.” AML and CFT programs were identified by the Secretary as important components of managing financial systems with digital assets.
- Software and money is the core of a healthy financial system. Sec. Yellen pointed to history and Alexander Hamilton in 1790 and his challenge of dealing with many different forms of money. In 1791, the national currency was created and 1792 brought the U.S. mint among other systems. Eventually, the bank of the United States was disintermediated by states issuing their own currency. The National Bank Act during the Lincoln administration brought things back together. Sec. Yellen spoke to the importance of what the U.S. currency does and the central of the dollar in the world’s economy. Could digital assets help? – she offered to the audience that a CBDC could be one way things change with the help of digital assets. She noted the national security benefits of the U.S. dollar. She said years of development may be required to create a CBDC considering the stakes. “Technology driven financial innovation is inherently cross-border.”
- US role in the global economy