US Treasury secretary believes that CBDC could surpass Bitcoin as means of exchange
The Treasury Secretary of the United State recently delivered her first speech solely dedicated to cryptocurrencies. While discussing the risks and benefits of crypto and CBDCs the secretary listed five historical lessons.
The speech was delivered before the American University Kogod School of Business Center for innovation on Thursday. Her words reflect significant evolution in how the Treasury Secretary views digital assets.
She maintains a level of long-standing skepticism of stability risks that could pose to the financial system. also she recognizes that they can produce reduced reliance on centralized intermediaries like banks and credit card companies.
She notes that crypto proponents inflate the abilities of smart contracts, which can offer trading, borrowing, and lending of financial products in a decentralized way.
“To the extent, that setup is more convenient, and costs are competitive with those required for traditional financial services, digital assets offer the potential to expand access,” she said.
The Treasury and other agencies will work to produce policy recommendations around the objectives outlined in President Biden's crypto Executive order last month.
The Treasury will be applying certain historical lessons as a "compass" to navigate the task. The first is that the financial system "benefits" from "responsible innovation" FOr ex. she notes that digital assets could deliver the promise of cheaper cross-border remittance payments. especially for members of non-G7 countries.
She urged caution about how innovation in this space could harm the most vulnerable in society if not regulated fast enough. She cited the 2008 financial circle caused by overly risky shadow banks as evidence of this, which the OCC chief has compared to the crypto boom.
Yellen calls for a "tech neutral" regulatory approach that specifically targets risks and fraud rather than blockchain technology more broadly. This is a term frequently floated by SEC Chairman Gary Gensler when discussing the legal status of cryptocurrencies.
Yellen's fourth lesson argues for the extent of the dollar's role as a world reserve currency in that context, she claims that a CBDC could be the dollar's next "evolution" expanding that position.
“Could [a CBDC] make the financial system more equitable, accessible, and inclusive?” she asked. “How might a US CBDC interact with existing national currencies, foreign CBDCs, or private Stablecoins?”
Biden's Executive Order called for "urgent" CBDC research and development for similar reasons if made interoperable with other national CBDCs he said it could help support the continued centrality of the United States within the international financial system.
Yellen noted that a CBDC and another Stable coin could achieve further adoption as a means of payment than Bitcoin, due to Bitcoin's price instability, "high fees and slower processing times".
Federal Reserve Chairman Jerome Powell has made the same claim in the past, might be outdated Strike CEO Jack Mallers declared yesterday that his company had partnered with Shopify, point of sale giants NCR and Blackhawk. This will allow American to make instant Bitcoin payments through the lightning network to retailers like Mcdonald's and Walmart.
The final lesson of Yellen is to push for responsible innovation, providing "competitiveness and growth" while protecting national security interests. She notes the radical divergence of viewpoints on crypto to be reminiscent of previous "new and transformative technologies."