U.S. Treasury Secretary Janet Yellen said cryptocurrencies are an integral part of the future financial system while speaking about digital assets at American University’s Kogod School of Business Center for Innovation.
In her speech, Yellen pointed out that crypto has grown into a multi-trillion-dollar industry, up from around $14 billion approximately five years ago. However, she added that this rapid growth introduces a new world of opportunities and risks that would have seemed unrealistic a few decades ago.
Yellen further noted that these perks and shortcomings divide the masses, with crypto proponents pushing for the U.S. government to back off and let innovation take its course and skeptics advocating for the government to take a more restrictive approach.
According to her:
Such divergence of perspectives has often been associated with new and transformative technologies.
Things to remember while exploring crypto innovation
She added that the U.S. should keep in mind five lessons while navigating the opportunities and challenges that nascent technologies present.
Her first lesson is that the U.S. financial system benefits from responsible innovation. The second lesson is that vulnerable people often suffer the most when regulation is not moving at the same pace as innovation.
The third lesson is that regulation should focus on activities and risk and activities, not technology. Yellen’s fourth lesson is that sovereign money is the core of a functioning financial system. Finally, she said the government needs to work together with innovators.
Yellen dwelled on the fifth lesson, saying the U.S. government’s role should be to ensure responsible innovation. She opined that responsible innovation should work for all Americans, foster economic competitiveness and growth, and protect U.S. interests and the planet.
Such responsible innovation should reflect thoughtful public-private dialogue and take account of the many lessons we’ve learned throughout our financial history. This sort of pragmatism has served us well in the past and I believe it is the right approach today.
Digital assets do not present new issues
Yellen’s speech comes after President Joe Biden signed the Executive Order on Ensuring Responsible Development of Digital Assets in the past month. In her speech, she claimed the Treasury was already working on most of the tasks the order assigned to federal agencies even before Biden signed it.
Although she admitted she did not know what would come out of the work that the order assigned, Yellen said the U.S. is not navigating the nascent asset class without a compass.
She added that digital assets are relatively new, but the issues they present are not, and the U.S. is well versed in the benefits and consequences of innovation.