U.S. Treasury Secretary Yellen Says Crypto Rules Must Support Innovation But Also Should Match Traditional Financial System

Regulatory Framework Should Encourage Innovation in Crypto – Yellen

U.S treasury secretary Janet Yellen has emphasized the need for a crypto regulatory framework to support regulation within the space. This is in line with the recent executive order released by the white house which seeks to bring oversight over the crypto space.

The crypto community received the executive order well as it seeks to support innovative projects especially those with the potential to revolutionize the financial industry. An excerpt of Yellen’s speech which is to be delivered at American University in Washington on Thursday reads:

“Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy. 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.”

Caution as mainstream financial systems enter the crypto

Banks and other financial institutions have developed more interest in cryptocurrency recently. According to reports, some banks are starting to incorporate digital assets into their employees’ savings plans, exposing them to crypto and the risks involved in crypto investments.

Yellen says that it is necessary for the regulatory framework to stress these risks so that mainstream financial institutions entering the space will be aware and make informed decisions. 

Until now, there hasn’t been a clear regulatory framework for cryptocurrencies in the United States, but regulators are now looking for ways to provide oversight on crypto exchanges and banks that provided crypto services such as crypto custody.

Biden’s executive order has already made provision for the Treasury and Commerce departments to explore the role that cryptocurrencies play in the future of money. This suggests the government’s openness towards the emerging crypto space.

Consumer protection is paramount

Although cryptocurrencies are new and come with new possibilities, Yellen says they are to be treated the same way as similar services as what matters is the service they render, not the technology underlying them. The treasury secretary emphasized the protection of consumers, investors, and businesses while custodial platforms should ensure customers’ funds are not lost. 

Yellen’s emphasis on supporting good, innovative crypto projects rather than cracking down on them has helped the crypto community and regulators to agree on crypto regulations that will help to boost the growth of the space in the United States.

Yellen also expressed that wherever possible crypto laws should be “tech neutral”:

“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, Similarly, firms that hold customer assets should be required to ensure those assets are not lost, stolen, or used without the customer’s permission.”