Treasury Secretary Yellen lays out principles for cryptocurrency regulation

The Treasury has staked out its vision for crypto policy, sort of.

On April 7, Treasury Secretary Janet Yellen gave a speech on digital assets — the first of its kind during her term. The speech is an early response to President Biden’s March executive order calling for agencies to coordinate efforts on cryptocurrency policy. In that respect, it is the first response of its kind from any agency.

Speaking at American University’s Don Myers Technology & Innovation Building, Yellen took the stage to Stevie Wonder’s Superstition and left to Creedence Clearwater Revival’s Have You Ever Seen the Rain, setting up a notable contrast between a sleek contemporary lecture hall and 50-year-old pieces of Americana. 

Yellen’s speech featured no bombshells — indeed, it seemed careful not to alarm stakeholders in the cryptocurrency industry. Instead, she carefully framed cryptocurrencies and her prognosis for their regulation in relation to historical parallels.

Casting back to Alexander Hamilton and the private banknotes that precipitated the National Banking Act under Lincoln, Yellen affirmed “A crisis catalyzed reform.”

What does this mean in the context of cryptocurrencies? Like others in the administration — most conspicuously Securities and Exchange Commission Chair Gary Gensler — have suggested, cryptocurrencies and the firms that handle them largely fall under existing statutory categories. 

“Digital assets may be new, but many of the issues they present are not. We have enjoyed the benefits of innovation in the past, and we have also confronted some of the  unintended consequences,” said Yellen, explaining:

“The principle of tech neutrality is also applicable to concerns related to tax evasion, illicit  finance, and national security – topics that are particularly pertinent in the world today. It’s illegal to evade taxes, launder money, or avoid sanctions. It doesn’t matter whether you’re using  checks, wires, or cryptocurrency.”

Despite this, Yellen maintained the President’s Working Group’s push for new legislation when it comes to stablecoins. She did not, however, explicitly support the PWG’s original push to restrict stablecoin issuance to insured depository institutions. 

The Treasury in general and Yellen, in particular, have had a busy week.

On Wednesday, she appeared before the House Financial Services Committee to testify on the state of international finance, a conversation that focused heavily on the Treasury’s sanctions on Russia. The day before, the Treasury sanctioned Russia-based darknet market Hydra and associated crypto exchange Garantex, an action that Yellen made mentioned in her two subsequent appearances. 

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