Treasury Secretary Janet Yellen opted for American University rather than Miami’s Bitcoin 2022 to update the regulatory outlook for digital assets. Having already been immortalized in a 2021 rap song, we’d not be surprised if she’s streaming Deadmau5 on the car ride back to the office.
Yellen opened her remarks with the broader realities global financial stability regulators face by observing “the digitization of finance – has been in the making for decades. In 1990, there were fewer than 3 million internet users. Now there are 4.5 billion, and we take for granted that many aspects of our financial lives can be managed from small internet-connected devices that fit into the palms of our hands.”
Yellen then reiterated much of what other officials have said about digital asset rule objectives, which should encourage market participants. The once feared notion that regulators would impede progress certainly hasn’t proven to be the case. The first section of her remarks focused on potential upsides of “responsible innovation.” Her speech officially connects the transatlantic finance ministries, securities regulators, and central banks on core policy objectives guiding digital asset rules:
The secretary supports continued analysis of potential central bank digital currencies and noted that dollar dominance obligates the US to lead in the digital asset design process and rules implementation space. Issues such as taxation, beneficial ownership requirements, and accounting were alluded to but not directly mentioned.
Other US regulators are also filling in some details. SEC Chair Gary Gensler last week suggested his agency and the CFTC should be authorized to coordinate on digital asset rules enforcement. Agency staff recently issued a bulletin on crypto currency platform accounting issues.
Acting Comptroller of the Currency, Michael Hsu recently lent his voice to the discussion in remarks to the American Bankers Association where he focused on the tail risk side of a booming financial sub-sector operating without a basic (but coming) rulebook. The BoE’s Financial Policy Committee recently added to Deputy Governor Jon Cunliffe’s nearly one-year steady attention to these topics with its report Financial Stability in Focus: Crypto-assets and decentralized finance.
Global and US regulatory coordination is growing. Unsurprisingly, it remains a few steps behind technology and markets, though they are moving apace. We continue to see adopted rules coming later this year. In our view, marketplace beneficiaries continue to include well-capitalized incumbents and new players willing and able to manage an eventual rulebook, consumers, and investors in product and technology providers.
