Regulatory policy

Treasury Secretary Yellen on Digital Asset Policy, Innovation and Regulation | Cadwalader, Wickersham & Taft LLP

On April 7, 2022, Treasury Secretary Janet Yellen delivered a speech on Digital Asset Policy, Innovation, and Regulation. Yellen began by noting that a few weeks ago, President Biden signed an Executive Order on a Whole of Government Approach to Digital Asset Policy, which directs federal government experts to conduct in-depth analysis to balance responsible development. digital assets with the risks they present. This task will be guided by six strategic objectives:

  1. protect consumers, investors and businesses;
  2. preserve financial stability from systemic risk;
  3. mitigate national security risks;
  4. promote US economic leadership and competitiveness;
  5. promote equitable access to safe and affordable financial services; and
  6. support responsible technological advances that take into account privacy, human rights and climate change considerations.

In this regard, Yellen shared the following five lessons that will guide future work in this area:

  1. The US financial system benefits from responsible innovation. Introducing new technologies, such as central bank digital currency, or “CBDC,” while properly managing risk, can make the U.S. financial system more efficient and safer for most Americans.
  2. When regulation fails to keep pace with innovation, it is often the vulnerable who suffer the most.
  3. Regulation should be risk- and activity-based, not technology-specific. Wherever possible, regulation should be “technically neutral”.
  4. Sovereign currency is at the heart of a well-functioning financial system, and the United States benefits from the central role that the dollar and American financial institutions play in global finance. The CBDC could be the next evolution of US currency, which Yellen says would take years to develop.
  5. We must work together to ensure responsible innovation. Furthermore, technology-driven financial innovation is inherently cross-border and requires international cooperation.

Yellen stressed that the government should ensure the development of digital assets that work for all Americans, protect national security and planetary interests, and contribute to US economic competitiveness and growth. To achieve this, however, in addition to enacting appropriate regulations aimed at reducing the risks inherent in digital assets, the United States may need to accelerate the development of its CBDC beyond the timeline envisaged by Yellen, taking into account that The digital CBDC Yuan is already available and is intended to directly compete with and replace the US dollar and the USDT stablecoin.