You’ve heard the pitch. Someone in your life — whether a Reddit-trawling younger cousin or a suddenly sorta-wealthy colleague — is a cryptocurrency evangelist, and, at this point, you’ve likely heard their sermon on the thrills of ditching fiat currency, centralized banking, and the watchful eye of Big Government.
But give the bitcoin boys some credit. The digital asset space is now too big for Uncle Sam to ignore. On Thursday, as the government begins to turn its gaze to crypto, Treasury Secretary Janet Yellen called for increased regulatory scrutiny for the crypto and digital currency space, warning of fraud and illicit activity.
Tales From the Crypt(o)
Yellen’s comments, given in a Thursday speech at American University, come after President Biden’s executive order in March tasked federal departments and agencies with developing regulation frameworks for the unwieldy crypto ecosystem. Naturally, Yellen’s agency was tapped to lead the way.
While her comments were light on specifics, they pointed to corners of the crypto space the government has highlighted as areas of concern, touching on everything from Wall Street to the possibility of a government-issued stablecoin:
- Regulation must be based on risks and not technologies, she argued, urging safeguards to protect consumers, investors, and businesses. She added taxpayers should receive the same type of tax reporting on digital asset transactions as they do for stock and bond transactions.
- While Yellen said a government stablecoin, sometimes called a central bank digital currency (CBDC), is not on the horizon, the US and its G-20 partners plan to launch an instant domestic payment service to smooth over cross-border transaction frictions — one of the problems CBDC’s aim to solve.
“Digital assets may be new, but many of the issues they present are not,” Yellen concluded.
Buy the Dip?: Fearing increased regulation, investors dumped cryptocurrencies across the board. Bitcoin fell below $45,000, dropping about 5% in the past week, which has analysts cautioning the world’s biggest cryptocurrency may become increasingly volatile. Time to comfort the nearest bitcoin bull you can find.