Treasury Secretary Janet Yellen has never been a crypto cheerleader. After her tenure as Chair of the Federal Reserve, she famously said in 2018 that she was "not a fan" of Bitcoin, pointing to a dearth of transactions on the network and a supposed surfeit of illicit transactions.
But in a recent interview with CNBC, she said that while she still has some apprehension, her current attitude is not wholly negative.
"I have a little bit of skepticism because I think there are valid concerns about it," she told the outlet. "Some have to do with financial stability, consumer/investor protection, use for illicit transactions and other things. On the other hand, there are benefits from crypto, and we recognize that innovation in the payment system can be a healthy thing."
She also suggested that Bitcoin and digital assets are not a fad. "Crypto has obviously grown by leaps and bounds," she said. "And it's now playing a significant role—not really so much in transactions, but in investment decisions of lots of Americans."
"I have a little bit of skepticism," says @SecYellen on #crypto. "On the other hand there are benefits from crypto and we recognize innovation in the payment systems can be a healthy thing," pic.twitter.com/7N1SYxICwq
— Squawk Box (@SquawkCNBC) March 25, 2022
Yellen's slight change in tone may be because of evidence contrary to her big ticket worries—criminal enterprises still prefer cash for money laundering given blockchains' traceability, and experiments with the Lightning Network by El Salvador and financial payments firm Block could yet lead to greater use in transactions.
Her evolving viewpoint matters because President Biden this month tasked the Treasury Department and other government agencies with beginning the process of creating a regulatory framework for the crypto industry. The Executive Order on Ensuring Responsible Development of Digital Assets gives agencies several months to deliver strategies on everything from ensuring crypto can't effectively be used to finance terrorism to outlining consumer protection safeguards—all while maintaining an American edge on innovation.
The goal, said Yellen, is to provide "recommendations that will create a regulatory environment in which healthy innovation" occurs.
The crypto industry has been clamoring for a regulatory framework while remaining somewhat wary of the regulators charged with creating it. Securities and Exchange Commission Chair Gary Gensler has sought a broader role for his agency—one that would allow it to police stablecoins and wider swaths of the cryptocurrency ecosystem. Many see Gensler and the SEC as relying too heavily on enforcement actions without providing sufficient guidance on how to stay clean—including, in some instances, not sharing which assets it views as securities.
But Yellen likely has more sway than Gensler, who is rumored to want her job; she is a cabinet member and the fourth-ranking member of the executive branch. It was Yellen who convened the President's Working Group on Financial Markets—which pulled in the SEC, Commodity Futures Trading Commission, Comptroller of the Currency and Federal Reserve—back in July 2021 to start drafting stablecoin regulations.
She may never become a fan of Bitcoin, but crypto industry advocates are parsing her words to see whether they consider her to be fair.