Yellen points to “significant opportunities” when Treasury shares crypto tips

Treasury Secretary Janet Yellen said that while there are risks to digital assets, there could be “significant opportunities.”

Treasury Shares Crypto Reports

Six months after President Biden signed an executive order to “Ensure Responsible Development of Digital Assets,” the Treasury Department has shared three reports on how policymakers can regulate the space.

The White House Treasury Department published detailed summaries on three crypto-related topics, covering the future of money and payments, the impact on consumers and companies, and plans to prevent financial crime. The topics discussed largely mirrored those discussed in the White House’s crypto regulatory framework, which was also published today.

In a statement sharing the three reports, Treasury Secretary Janet Yellen acknowledged the potential digital assets could hold, while acknowledging the risks. “The reports clearly identify the real challenges and risks of digital assets used for financial services,” she said. “At the same time, if these risks are mitigated, digital assets and other new technologies can offer significant opportunities.”

Government Tips NFT Use Cases

The guide to the future of money and payments discussed potential designs for a central bank digital currency, noting that a digital dollar could offer benefits such as faster transactions and finality and the ability to process cross-border payments. It also urged the Federal Reserve to continue its research into CBDCs. In addition, the report focused on the need for the US to support “responsible innovations in payments”, suggesting that a new framework may be needed to support non-banking companies.

In the report covering the potential implications digital assets could have for consumers and businesses, the Treasury highlighted potential risks. The risks were divided into three categories: behavioral risk (such as fraud), operational risk (such as software failure) and intermediary risk (such as a crypto custodian going insolvent). It also recognized some of the potential use cases for NFTs, including tokenizing real estate deeds, paying music and movie royalties on the blockchain, and certifying the authenticity of high-value goods. It also said that NFTs may represent membership tokens or tickets, but that “many of the potential use cases are still materializing, in part due to evolving technological and legal landscapes, including with respect to licensing, contracts, copyright and intellectual property, anti-money laundering of money and data protection.”

The third report touched on addressing crime in digital assets. It highlighted potential threats such as money laundering, disintermediation and terrorist financing, and added a list of priority actions for the government to focus on. These actions include plans to further monitor emerging risks, improve enforcement of anti-money laundering regulations and punish cybercriminals with actions such as seizure, prosecution, civil enforcement and targeted sanctions. It added that “commingling of services, darknet markets and non-compliant VASPs used to launder or disburse illicit funds for fiat currency are of primary concern.” To the dismay of the cryptocurrency community, the Treasury made the controversial decision to ban privacy protocol Tornado Cash and its smart contracts last month; Coinbase is funding a lawsuit against the government over the sanctions.

While the Treasury Department has commented on crypto in the past and recently moved to ban Tornado Cash, today’s reports provide a comprehensive look at how the department plans to police the space. Yellen’s comments show that while the Treasury is approaching crypto with caution because of the risks, it is not ready to reject the technology entirely.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.