U.S. Treasury Secretary Janet Yellen’s stance on cryptocurrencies has softened, but there was still plenty of skepticism during her speech on digital assets at American University this morning. 

Yellen laid out federal regulators' plans for reckoning with the possibility of reduced reliance on centralized intermediaries, like banks and credit card companies. She also restated her concerns regarding stablecoins.

“Most issuers say that they back their coins with traditional assets that are safe and liquid. In this way, whenever you want to trade your stablecoin back into dollars, the company has the money to make the exchange,” she said. “Right now, no one can assure you that will happen.”

Her stance on stablecoins has been well documented. 


Last summer she urged lawmakers to “act quickly to ensure there is an appropriate U.S. regulatory framework in place” for stablecoins. Then in October, the Treasury Department indicated it would allow the U.S. Securities and Exchange Commission to take the lead in regulating stablecoins like Tether (UST) and USD Coin (USDC).

In January, the Federal Reserve published a report saying it was still studying the possibility of issuing central bank digital currency (CBDC).

A CBDC are digital versions of a state’s fiat currency that can be used as legal tender, like China’s digital yuan (e-CNY), Bahamanian sand dollars (B$), and Nigeria’s eNaira. Unlike decentralized cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH), CBDCs are backed by a state’s central bank.

Yellen said U.S. regulators are still considering the benefits of CBDC, adding that the Treasury would work with the White House and other agencies to issue reports on cryptocurrencies over the next six months.


There’s already been some pushback from lawmakers who say CBDC would pose too many privacy risks. 

Rep. Tom Emmer (R-MN) sought to ban the U.S. from issuing its own CBDC in January, saying that if users had to open an account with Fed to access the currency it would “put the Fed on an insidious path akin to China’s digital authoritarianism.”

Just last month, Sen. Ted Cruz (R-TX) echoed Emmer’s concerns in his own legislation that would prohibit the Federal Reserve from issuing CBDC directly to individuals. 

“Not only would this CBDC model centralize Americans’ financial information, leaving it vulnerable to attack,” he wrote in a press release on his website, “it could be used as a direct surveillance tool into the private transactions of Americans.”

The government’s plans also include moving forward with FedNow, an instantaneous payments system the Federal Reserve has been working on since 2019. 

A large portion of her remarks echoed the executive order President Joe Biden signed a month ago, saying the Treasury seeks to protect consumers, promote stability, mitigate risks and promote equitable access to financial services. But Yellen did say she remains unsure whether digital payments will create a more efficient payment system that lowers costs for all participants.

“Personally, I think it’s too early to tell,” she said. “Issues like processing costs and technological barriers to access will need to be overcome.”

She also said that the volatile price of Bitcoin and other cryptocurrencies has inhibited its widespread use for things like buying a gallon of milk. Even so, Yellen did spend a considerable amount of time describing problems with the current financial system.


“For most Americans, many transactions take too long to settle,” she said. “A combination of technological factors and business incentives produce a common, frustrating experience faced by tens of millions of Americans.”

The government has been under pressure for years to issue regulatory guidance on cryptocurrencies and blockchain technology. Yellen acknowledged the danger of delaying regulation any longer, recalling the events that caused the Great Recession of 2008.

“When regulation fails to keep pace with innovation, vulnerable people suffer the greatest,” she said. “This is a painful lesson we learned during the Global Financial Crisis.”

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