“I don’t yet know the conclusions we will reach, but we must be clear that issuing a CBDC would likely present a major design and engineering challenge that would require years of development, not months,” Yellen said in prepared remarks to an event Thursday in Washington. CBDC refers to a central bank digital currency -- for the US, a digital dollar.
Yellen in her speech outlined a set of broad principles that she believes should guide the creation of a new framework for regulating digital assets, seeking to encourage innovation while protecting consumers, investors and financial stability.
“Our regulatory frameworks should be designed to support responsible innovation while managing risks -- especially those that could disrupt the financial system and economy,” Yellen said.
‘Tech Neutral’
She stressed that as regulators strive to keep up with innovation, the rules they create should be “tech neutral.”
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“That process should be guided by the risks associated with the services provided to households and businesses, not the underlying technology,” she said.
Issuers of digital assets and service providers in the sector should protect consumers and investors from fraud and misleading information, insure proper custody of assets and provide adequate tax reporting information, she said.
The speech follows a March executive order directing a number of federal agencies, including the Treasury, to devote more attention to the study and prospective regulation of digital assets, which can include a range of crypto coins, like Bitcoin, fixed-value stablecoins and digital money issued by central banks.
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Policymakers, Yellen added, should be prepared for possible changes to the structure of financial markets, citing potential changes driven by distributed ledger technology.
“While this could make markets less vulnerable to the failure of any particular firm, it is critical to ensure we maintain visibility into potential build-ups of systemic risk and continue to have effective tools for tamping down excesses where they arise,” she said.
