In a recent statement, Treasury Secretary Janet Yellen urged Congress to enact legislation to address the challenges and risks posed by the growing use of cryptocurrencies. She said that the current regulatory framework is inadequate and outdated, and that it leaves consumers, investors, and the financial system vulnerable to fraud, cyberattacks, money laundering, and tax evasion.
Yellen highlighted some of the benefits of crypto innovation, such as faster and cheaper payments, greater financial inclusion, and more efficient capital markets. However, she also warned that these benefits come with significant trade-offs and dangers, such as volatility, environmental impact, illicit activity, and lack of consumer protection and balancing the need for regulatory oversight and enforcement with the respect for privacy and civil liberties.
She said that the Treasury Department has been working with other federal agencies and international partners to develop a comprehensive and coordinated approach to crypto regulation. She also said that the Treasury has been engaging with stakeholders from the private sector, academia, civil society, and state and local governments to solicit feedback and input.
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Yellen emphasized that Congress has a critical role to play in shaping the future of crypto regulation. She said that existing laws and rules are not sufficient to address the unique features and challenges of crypto assets and activities. She called on lawmakers to pass legislation that would provide clarity, consistency, and certainty for the crypto industry and its users.
The Secretary also outlined some of the key principles that should guide the crypto legislation, such as:
Establishing a clear and consistent regulatory framework for crypto activities across different agencies and jurisdictions.
Promoting responsible innovation and competition in the crypto sector while protecting consumers and investors from fraud and abuse.
Enhancing cooperation and coordination among federal, state, and international authorities on crypto matters.
Fostering transparency and accountability in the crypto market by requiring reporting and disclosure of relevant information.
Ensuring that crypto entities comply with anti-money laundering, counter-terrorism financing, sanctions, and tax obligations.
The US government has been working on a comprehensive framework for regulating the crypto industry, which has grown exponentially in the past few years. The framework aims to balance the innovation and potential of crypto with the protection of investors, consumers, and national security.
The framework is based on four main principles:
Clarity: The framework defines the roles and responsibilities of different federal agencies, such as the SEC, CFTC, FinCEN, and the IRS, in overseeing various aspects of the crypto ecosystem, such as securities, commodities, anti-money laundering, and taxation. It also clarifies the legal status and treatment of different types of crypto assets, such as stablecoins, tokens, and NFTs.
Innovation: The framework encourages and supports the development and adoption of crypto technologies, such as blockchain, smart contracts, and decentralized applications. It also creates a regulatory sandbox for testing new products and services in a safe and controlled environment, with appropriate safeguards and oversight.
Inclusion: The framework promotes financial inclusion and access for all Americans, especially those who are underserved or unbanked by the traditional financial system. It also fosters diversity and inclusion in the crypto industry, by ensuring equal opportunities and representation for women, minorities, and other marginalized groups.
Security: The framework protects the integrity and stability of the crypto market, by preventing fraud, manipulation, cyberattacks, and other illicit activities. It also protects the privacy and security of users’ data and funds, by requiring adequate disclosures, safeguards, and compliance from crypto service providers.
The Secretary concluded by saying that the US has a unique opportunity to lead the world in shaping the future of crypto and digital assets, but it requires urgent and decisive action from Congress. The Secretary said that the Treasury Department stands ready to work with lawmakers and stakeholders to advance this important agenda.
Federal Reserve Bank of Minneapolis’s President, Neel Kashkari explains why he is skeptical of Bitcoin as a Currency
Meanwhile, Bitcoin is a popular cryptocurrency that has attracted a lot of attention and investment in recent years. However, not everyone is convinced that it can function as a reliable and stable currency. In this blog post, I will explain why I am skeptical of bitcoin as a currency, and why I think it poses significant risks to the financial system and the economy.
First, let me clarify what I mean by a currency. A currency is a medium of exchange, a unit of account, and a store of value. A medium of exchange means that people can use it to buy and sell goods and services. A unit of account means that people can measure the value of things in terms of the currency. A store of value means that people can hold the currency and expect it to retain its purchasing power over time.
Bitcoin fails to meet these criteria for a currency. As a medium of exchange, bitcoin is very inefficient and costly. Transactions are slow, volatile, and subject to fraud and hacking. The network consumes enormous amounts of energy and resources, which is wasteful and harmful to the environment. Moreover, bitcoin is not widely accepted or regulated by any government or central authority, which limits its usability and legitimacy.
As a unit of account, bitcoin is also unreliable and inconsistent. The price of bitcoin fluctuates wildly, depending on supply and demand, speculation, and market sentiment. This makes it hard to compare the value of different goods and services in terms of bitcoin, or to plan and budget for the future. Furthermore, bitcoin is not backed by anything tangible or credible, unlike fiat currencies that are backed by the full faith and credit of sovereign governments.
As a store of value, bitcoin is also risky and uncertain. The value of bitcoin can drop dramatically in a short period of time, eroding its purchasing power and wealth. There is no guarantee that bitcoin will retain its value in the long run, or that it will not be replaced by another cryptocurrency or technology. Additionally, bitcoin is vulnerable to theft, loss, or destruction, as there is no central authority or institution that can protect or insure it.
In summary, Neel Kashkari is skeptical of bitcoin as a currency because it fails to perform the basic functions of a currency. It is inefficient, costly, unstable, unregulated, unbacked, and insecure.
It poses significant challenges and threats to the financial system and the economy, as it can facilitate illicit activities, evade taxes and regulations, undermine monetary policy, destabilize markets, and create bubbles and crashes. I believe that fiat currencies issued by central banks are superior to bitcoin as currencies, as they are more efficient, stable, reliable, regulated, backed, and secure.
Some of the assertions postulated by Neel in his review does not reflect on the use cases and utilities tied around Bitcoin as a standard global Currency in its totality, transaction costs on Bitcoin are cheaper, efficient and durable to fiats but still have certain inherent contradictions like Scalability and Security.