"Transformative technologies will benefit society", U.S. Treasury Secretary Yellen publicly talked about digital assets for the first time

U.S. Treasury Secretary Janet Yellen said in her first speech on digital assets on Thursday that a digital dollar could become a "trusted currency comparable to physical cash."

Speaking to attendees at an American University event, Yellen highlighted the polarized divide in opinion about cryptocurrencies, saying this is often the case with "transformative" technologies. "Some proponents talk as if the technology is so radical and beneficial that government should simply step back and let innovation take its course," she said. "On the other side, skeptics see limited value in the technology and related products and advocate for more stringent government regulation."

Speaking at an event at American University, Yellen highlighted the polarized market opinion on cryptocurrencies, saying that this is often the case with "transformative" technologies. "Some supporters speak as if the technology is so radically and beneficially transformative that government should simply step back and let innovation take its course," she said. "On the other hand, skeptics see limited, if any, value in the technology and related products, and advocate for a more restrictive approach by government."
In her speech, she focused on central bank digital currencies (CBDCs), a key area of ​​focus for U.S. policymakers over the past few years.

Yellen also said, "The development of our currency to its current form has been a dynamic process that has evolved over centuries. Today, monetary sovereignty and a unified currency have delivered clear benefits for economic growth and stability. Our approach to digital assets must be guided primarily by a focus on these advantages, and some have suggested that CBDCs could be the next evolution of our currency."

“Any potential CBDC design must address its potential negative impact on the financial system, privacy, its ability to address financial crime and national security issues, its ability to regulate macroeconomic policies, and how it interacts with existing fiat currencies, stablecoins, or other CBDCs.”

Referring to U.S. President Joe Biden’s executive order on digital assets, Yellen said any form of CBDC must support the role of the U.S. dollar in international markets.
"I don't know yet what conclusions we will reach, but we must be clear that issuing a CBDC could pose significant design and engineering challenges that would require years of development, not months. Therefore, I share the President's urgency to advance research to understand the challenges and opportunities that a CBDC could bring to U.S. interests."

Yellen highlighted five lessons in her speech:

• The financial system could "benefit from responsible innovation";

• If regulation does not keep pace with innovation, it could cause harm to vulnerable individuals;

• Rules should focus on activities and their risks rather than specific technologies;

• The United States benefits from the existing role of the dollar;

• Regulators should work with industry to support responsible innovation

Yellen pointed to specific concerns surrounding existing cryptocurrency markets, such as the operation of stablecoins. She mentioned the collapse of Iron Finance last year, when the price of its TITAN token fell, ultimately leading to the decoupling of its IRON stablecoin from the U.S. dollar.
Yellen emphasized, “This is not hypothetical. There was a stablecoin crash (algorithmic stablecoin) in June 2021, when the prices of assets used to support stablecoins fell sharply, triggering a negative feedback loop of stablecoin redemptions and further price declines.”