Crypto Rules Should Match Traditional Financial System, Yellen to Say Thursday

U.S. Treasury Secretary Janet Yellen wants to put the crypto industry on the same level and facing the same rules as the traditional U.S. financial system, according to excerpts from her first speech to focus entirely on digital assets.

Yellen will make the case that finance – including the newest innovations from the crypto industry – should be subject to consistent, “tech neutral” rules that protect people “from fraud and misleading statements regardless of whether assets are stored on a balance sheet or distributed ledger.”

“Digital assets may be new, but many of the issues they present are not,” Yellen will say in her remarks, prepared for delivery Thursday at American University. “When new technologies enable new activities, products, and services, financial regulations need to adjust.”

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The administration has been devoting increased attention to crypto, with President Joe Biden focusing the federal government’s efforts through a wide-ranging executive order issued last month. That order forms the backbone of Yellen’s speech, which is meant as a high-level outline of Treasury’s views and next steps while getting nowhere near the weeds of referencing individual products or firms, according to Treasury officials previewing the speech.

Though lawmakers have begun launching legislative efforts to foster cryptocurrency innovations while keeping the public and financial system safe from hazards, Yellen will argue that “regulators have authorities they can use to promote these objectives and Treasury supports those efforts.”

The Securities and Exchange Commission and Commodity Futures Trading Commission have already been active in staking out their authorities over crypto trading, but the U.S. banking regulators will also have their say as the agencies debate the best course through the Financial Stability Oversight Council.

The industry is already smarting from SEC proposals that crypto lobbyists and lawyers in Washington think could sweep digital assets into the agency’s oversight. Meanwhile, top Republicans such as Sen. Pat Toomey have been pitching legislation that could undermine the agency’s reach, though it’s unclear whether the closely-divided Congress will find enough common ground or interest to send any crypto bills to the White House this year.

As the industry grows and changes at a breakneck pace, Yellen thought it was a good time to share her view, Treasury officials said – including the sentiment that regulation will be critical for crypto’s development, not an impediment. Coming from the Biden administration’s chief financial voice, her speech makes it clear that crypto has become a top priority for the federal government.

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