U.S. Treasury Secretary Janet Yellen discussed digital assets policy, innovation, and regulation in a speech delivered April 8 at American University’s Kogod School of Business Center for Innovation.
Yellen talked about the evolution within the financial industry and how new technologies have raised the possibility of reduced reliance on centralized intermediaries like banks and credit card companies. The Treasury Secretary mentioned President Joe Biden’s executive order on digital assets and how it tasked the government to analyze the risks and rewards of digital asset development.
“I won’t predict where this work will take us, but that does not mean we are navigating without a compass,” Yellen said. “Digital assets may be new, but many of the issues they present are not. We have enjoyed benefits of innovation in the past, and we have also confronted some of the unintended consequences.”
Yellen offered some insights to navigate the opportunities and challenges posed by emerging technologies. First, she said the U.S. financial system benefits from responsible innovation but adds that when regulation fails to keep pace with innovation, vulnerable people often suffer the greatest harm. Also, she said regulation should be based on risks and activities, not specific technologies. Also, Yellen added that sovereign money is the core of a well-functioning financial system, and the U.S. benefits from the central role the dollar and U.S. financial institutions play in global finance.
“In my view, the governmentʼs role should be to ensure responsible innovation – innovation that works for all Americans, protects our national security interests and our planet, and contributes to our economic competitiveness and growth,” Yellen said. “Such responsible innovation should reflect thoughtful public-private dialogue and take account of the many lessons weʼve learned throughout our financial history.”
The National Association of Federally-Insured Credit Unions (NAFCU) recently released a Digital Assets issue brief that outlines the regulatory environment surrounding the early stages of digital assets’ integration into the broader economy.