Secretary of the Treasury Janet Yellen said Thursday that laws regulating cryptocurrencies must be able to promote “responsible innovation” while mitigating the risks posed by digital transactions.
In a speech delivered from American University in Washington, Yellen addressed the vast differences in the perception of cryptocurrencies among Americans.
“Some proponents speak as if the technology is so radically and beneficially transformative that the government should step back completely and let innovation take its course,” Yellen said. “On the other hand, skeptics see limited, if any, value in this technology and associated products and advocate that the government take a much more restrictive approach.”
The challenge of regulating cryptocurrencies
Yellen said that there are already regulators in place, such as banks and financial institutions, that have the tools to manage risks and are capable of adequately overseeing new types of intermediaries, but she stressed that regulatory frameworks must be tailored according to the participation of financial entities.
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“Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy,” she explained. “As banks and other traditional financial firms become more involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities.”
The Secretary of the Treasury said that cryptocurrencies have reduced reliance on centralized financial systems, “such as banks and credit card companies,” but that the price volatility of Bitcoin and other digital assets has slowed their spread as a payment method.
In early March, President Biden signed an executive order that seeks to ensure the “responsible development” of digital assets. Its aims include protecting consumers, investors and businesses from the potential financial risks of cryptoassets, and mitigating illicit finance and national security risks.
In this regard, Yellen stated that together with the White House, the Treasury will produce fundamental reports and recommendations related to these objectives in the next six months.
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