In a speech on digital assets policy released by the Treasury, Yellen said that in many cases regulators already have authorities that can manage crypto risks and provide appropriate oversight of new types of intermediaries such as digital asset exchanges.
“Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy,” Yellen said in the excerpts of her speech to be delivered at American University in Washington.
“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,” she said.
Crypto regulation remains patchy and regulators are still figuring out the best way to oversee trading platforms and crypto services provided by banks, such as digital asset custody.
Some lawmakers want regulators to crack down on the industry due to volatility in crypto asset valuations, causing some market worries about onerous new rules. But the White House’s and Treasury’s message on supporting responsible innovation has assuaged some of those fears.
Biden’s executive order requires the Treasury and the Commerce Departments and other agencies to prepare reports on “the future of money” and the role cryptocurrencies will play.
Yellen also said that wherever possible crypto regulations should be “tech neutral” and guided by risks associated with services provided to households and businesses, not the underlying technology.
“For example, consumers, investors, and businesses should be protected from fraud and misleading statements regardless of whether assets are stored on a balance sheet or distributed ledger,” Yellen said. “Similarly, firms that hold customer assets should be required to ensure those assets are not lost, stolen, or used without the customer’s permission.”
(Reporting by David Lawder; Editing by Sam Holmes)
By David Lawder