Yellen calls for ‘tech neutral’ regulation of digital assets

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Yahoo Finance’s Jennifer Schonberger discusses Treasury Secretary Janet Yellen’s latest wide-ranging remarks on crypto regulation.

Video Transcript

JULIE HYMAN: Treasury Secretary Janet Yellen speaking right now in Washington. For the first time, she is offering her views on regulating cryptocurrencies. This follows President Biden’s executive order on that the administration should study the matter. Our Jennifer Schonberger is here with the details on what we are hearing from the Treasury Secretary. Good morning, Jen.

JENNIFER SCHONBERGER: Hi, Julie. That’s right. In a comprehensive speech this morning, Secretary Yellen is making the case for regulating cryptocurrencies, saying that regulation should be based on risks, not underlying technology, while toeing the line between embracing the innovation that cryptocurrencies offer our payment system, while also looking at the risks presented.

Secretary Yellen speaking right now at American University saying, quote, “Wherever possible, regulation should be, quote, ‘tech neutral.’ Consumers, investors, and businesses should be protected from fraud and misleading statements, regardless of whether assets are stored on balance sheet or distributed ledger.” Yellen’s comments come after President Biden signed an executive order last month, calling for a whole of government approach on studying how to regulate crypto, charging Treasury with leading many of those studies.

Yellen is laying out her thinking in Treasury’s approach to digital assets and its work as part of the president’s executive order this morning. Yellen did not predict what the studies could conclude, but warned we should heed lessons from the 2008 financial crisis, as we embrace crypto’s innovations. She says those lessons should be used by regulators as a guide to set guardrails in place. She says digital assets may be new, but many of the issues they present are not.

Now the Treasury Secretary emphasized firms that hold customer assets should be required to ensure those assets are not stolen or used without customers’ permission. She also said taxpayers should get the same type of tax reporting information on crypto transactions that they receive for stocks and bonds so they can report that income to the IRS. And though Yellen says advocates of crypto think it creates a more efficient payment system with instantaneous transactions and lower costs, she thinks it’s too early to tell whether the technology will live up to that promise.

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For the time being, Yellen says volatile prices, high fees, and slower processing times in Bitcoin and other cryptocurrencies could stop them from being– from becoming widespread practical payments. Though Yellen sees stablecoins or central bank digital currencies as having a better chance of being used as a currency, she says a CBDC could help create a more efficient payment system. It could become a form of trusted money compared to physical cash.

Now Yellen says she doesn’t know what conclusion the administration will come to on a potential central bank digital currency, though she says it would take years, not months, to design one, though it should be urgently studied. So, Julie, laying out a very broad brush right here, Secretary Yellen really cluing us into her thinking and Treasury’s thinking on how this space could be regulated. Back to you.

BRIAN SOZZI: Jen, there is– this year really does seem like there’s a different tone around regulating crypto. Is this a year that a lot of these studies move to some form of concrete regulation? Or is this 2023 and beyond?

JENNIFER SCHONBERGER: Brian, I think this is going to be the year of the study. Because by the time these studies are completed, on average, they’re about 90 to 180 days. Then they got to digest that. So by the time we really see policy being put out, it’s probably going to be early 2023. Now, of course, we’re talking about the administration here. Congress is also looking at potential proposals. Specifically, we just saw one out yesterday afternoon on regulating stablecoins from Senator Toomey. Remains to be seen, though, whether that legislation could be moved this year or could spill into early next year.

JULIE HYMAN: Thanks so much, Jen. Appreciate it. We will look forward to more study and your details on them. Appreciate it.

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