Yellen's Call for 'Responsible' Cryptocurrency Innovation Is Appropriate

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Recently, when speaking at American University, Janet Yellen offered intelligent and judicious observations concerning the best way to control digital currencies and assets, innovation, and government regulations.

The U.S. Treasury Secretary discussed the sector's spectacular expansion from $14 billion to $3 trillion in just five years, as well as its beginnings, including the Bitcoin white paper's solution for preventing double-spending of digital assets, a major critique of pre-Bitcoin systems.

Yellen stated, "The government's job should be to assure responsible innovation - innovation that works for all Americans, preserves our national security interests and our planet, and contributes to economic development and competitiveness." Such responsible innovation should represent a meaningful discussion between the public and private sectors and take into consideration the many financial lessons we've learnt throughout history. This type of pragmatism has served us well in the past, and I believe it is the correct strategy today."

In a recent interview with the Huffington Post regarding crypto legislation, I stated that we require new rules, language, and a more flexible framework for initial coin offerings (ICO) that are consistent with anti-money laundering (AML) and know-your-customer (KYC) rulemaking to ensure innovation continues to thrive.

As CEO of the American Blockchain PAC, I applauded Secretary Yellen's sound instructions for a process of constructing a legal and regulatory framework to safeguard the public while fostering innovation. Rep. Glen "GT" Thompson (R-Pa.) has considerably accelerated this process by presenting a well-thought-out "crypto regulatory framework."

The "Thompson principles" provide a framework for exchanges of digital commodities, voluntary registration, and certified custodians of digital commodities. In addition, they provide an enhanced method for the creation of digital assets, a complete accounting of stablecoin assets and liabilities, protection for customers using stablecoins, and registration of users of asset-backed digital assets. They would conform to and apply to digital products that have been pre-sold.

These suggestions adhere to the procedure outlined by Secretary Yellen. Consider the following example of the suggested voluntary registration:

"Trading venues could opt into the [Commodity Futures Trading Commission] Digital Commodity Exchange framework or continue to be governed by individual state money transmitter licenses. Trading venues will be incentivized to pick CFTC regulation in order to decrease their regulatory costs by dealing with a single regulator, to be qualified to offer leveraged trading, and to be the entry point for new digital commodities for the retail public."

According to the Congressional Research Service, registration as a money transmitter is required in 49 states. To make this a reality requires millions of dollars and years of navigating regulatory mazes, followed by ongoing burdensome compliance obligations. This method is exorbitant for the majority of businesses, stifling innovation without yielding meaningfully increased public safety. Providing businesses with the option of "one-stop shopping" reflects Secretary Yellen's pragmatic advice.

Congress and the financial services sector have finally realized that bitcoin is not merely an extraordinary, widespread hallucination or the outcome of mass hysteria. The blockchain (from which cryptocurrencies are derived) is key to a number of significant new technologies, such as non-fungible tokens, Web 3, and the metaverse.

And President Joe Biden's Executive Order on "Ensuring the Responsible Development of Digital Assets" calls for risk mitigation while acknowledging that "the United States has an interest in ensuring that it remains at the forefront of responsible development and design of digital assets and the technology that underpins new forms of payments and capital flows in the international financial system."

The White House, the Secretary of the Treasury, and members of Congress, including Rep. Thompson and the chairs of the Congressional Blockchain Caucus – Reps. Bill Foster (D-Ill.), Darren Soto (D-Fla.), Peter Schweikert (R-Ariz.), and Tom Emmer (R-Minn.) – are representatives of the burgeoning distributed ledger sector.

The pillars of the public-private relationship that Secretary Yellen lauded have already been established. It is now time for everyone to assemble in the Secretary's Conference Room.

Such a discussion would increase President Biden and Secretary Yellen's concern for public safety, maintain America's leadership in responsible development, and define the future of digital assets and technology.

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