Janet Yellen Writes: It’s ‘Important We Consider the Benefits of Cryptocurrencies’

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Former Federal Reserve Chair Dr. Janet Yellen, the person widely expected to be the next U.S. Treasury Secretary, acknowledged the benefits of cryptoassets in her written response to one of the questions from Tuesday’s U.S. Senate confirmation hearing.

Yellen “served as the Chair of the Federal Reserve from 2014 to 2018, and as Vice Chair from 2010 to 2014.”

Pre-2021 Comments About Blockchain Technology and Bitcoin

According to a report by Coindesk published on 24 November 2020, here are some comments made by Yellen about cryptocurrency and blockchain technology while she was working as the Fed chair:

  • February 2014: “The Fed doesn’t have authority to supervise or regulate bitcoin in any way.”
  • October 2015: “We do not interpret bitcoin’s popularity as having a relationship with the public’s view of the Federal Reserve’s conduct of monetary policy.”
  • September 2016: “[Blockchain] could have very significant implications for the payments system and the conduct of business.”
  • January 2017: “[Blockchain] is a very important, new technology that could have implications for the way in which transactions are handled throughout the financial system.”
  • December 2017:
    • “It [i.e. Bitcoin] is not a stable store of value and it doesn’t constitute legal tender. It is a highly speculative asset.”
    • “The Fed doesn’t really play any role, any regulatory role with respect to bitcoin other than assuring that banking organizations that we do supervise are attentive that they’re appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering [and] Bank Secrecy Act responsibilities that they have.”
  • October 2018: “I will just say outright I am not a fan [of Bitcoin], and let me tell you why. I know there are hundreds of cryptocurrencies and maybe something is coming down the line that is more appealing but I think first of all, very few transactions [that] are actually handled by bitcoin, and many of those do take place on bitcoin are illegal, illicit transactions.”

Yellen’s Written Responses to Questions From the Senate Finance Committee

On Tuesday (January 19), the U.S. Senate Committee on Finance held a hearing to consider the anticipated nomination of former Fed Chair Janet L. Yellen to Secretary of the Treasury.

On page 93 of the written responses for the record, which were released on Thursday (January 21), we find the following question:

Dr. Yellen, what do you view as the potential threats and benefits these innovations and technologies will have on U.S. national security? Do you think more needs to be done to ensure we have appropriate safeguards and regulations for digital and cryptocurrencies in place?

And here is Yellen’s answer:

I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system. At the same time, we know they can be used to finance terrorism, facilitate money laundering, and support malign activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems.

I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities. If confirmed, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations.

On Tuesday, Yellen caused some panic in the crypto markets when in her oral answer to a question by Senator Maggie Hassan (D-N.H.) she said cryptocurrencies were used “mainly for illicit financing.”

However, her written comments about cryptocurrencies, which has not yet received much attention, should help to calm the nerves of crypto investors.

Jerry Brito, Executive Director at the DC-based crypto think tank Coin Center, said on Twitter that Yellen’s written comments were “more nuanced than what she said in oral testimony.”

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.