InfoBytes Blog
Yellen sets out principles for regulating digital assets
On April 7, Treasury Secretary Janet Yellen outlined a broad set of principles for regulating digital assets during remarks delivered at American University’s Kogod School of Business Center for Innovation. Yellen said that the approach she described largely reflects priorities outlined in an Executive Order issued by President Biden last month, which presented a “whole-of-government” strategy to coordinate a comprehensive approach for ensuring responsible innovation in digital assets policy (covered by InfoBytes here). Emphasizing that “regulatory frameworks should be designed to support responsible innovation while managing risks—especially those that could disrupt the financial system and economy,” Yellen cautioned that regulatory frameworks must appropriately reflect these risks as banks and other traditional financial firms enter this space. Moreover, she added that “new types of intermediaries, such as digital asset exchanges and other digital native intermediaries, should be subject to appropriate forms of oversight.”
During her remarks, Yellen discussed the risks and benefits to consumer protection and financial stability associated with the growth in digital assets. While Yellen did not provide specific instructions, she outlined general principles that she believes should guide the creation of a new framework for regulating digital assets. Stressing that regulations should be “tech neutral” and “based on risks and activities, not specific technologies,” Yellen explained that consumers and businesses should be protected from fraud regardless of whether assets are stored on a balance sheet or a distributed ledger. She also stressed the importance of ensuring that the growth of digital assets does not disproportionately impact vulnerable communities or exacerbate social, racial, or economic inequities. Yellen stated that, over the next six months, Treasury will collaborate with the White House and other agencies to produce reports and recommendations addressing opportunities and challenges posed by these emerging technologies.