Updated: Sep 26, 2022
Janet Yellen, the US Treasury Secretary, has warned that the development of a digital dollar could take years, as regulators conduct a six-month review of digital assets.
"We must be clear that issuing a CBDC (Central Bank Digital Currency) would likely present a major design and engineering challenge that would require years of development, not months," Sec. Yellen said at a Washington, D.C. event.
"So I share the President’s urgency in pulling forward research to understand the challenges and opportunities a CBDC could present to American interests," she added.
"When regulation fails to keep pace with innovation, vulnerable people often suffer the greatest harm," she warned.
Last month, US President Joe Biden issued an Executive Order on Digital Assets, directing experts from across the government to conduct in-depth analysis to "balance the responsible development of digital assets with the risk they present," according to Sec. Yellen.
Customers, investors, and businesses will be protected, financial stability will be protected from systemic risk, national security risks will be mitigated, US leadership and economic competitiveness will be promoted, equitable access to safe and affordable financial services will be supported, and responsible technology advances will be supported.
Secretary Yellen stated that the US Treasury will collaborate with colleagues from the White House and other state agencies over the next six months to produce a number of reports and recommendations related to these goals.
"Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy," she said.
Sec. Yellen outlined five lessons for working on digital assets as part of her remarks, emphasizing that "we need to work together to ensure responsible innovation" as we move forward.
"In my view, the government’s role should be to ensure responsible innovation – innovation that works for all Americans, protects our national security interests and our planet, and contributes to our economic competitiveness and growth," she stated.
"Such responsible innovation should reflect thoughtful public-private dialogue and take account of the many lessons we’ve learned throughout our financial history," said Federal Reserve Chairwoman Janet Yellen.
"We have a strong interest in ensuring that innovation does not lead to fragmentation in international payment architectures and that the development of digital asset technologies is consistent with our values and laws," she added.
Those who try to profit from digital assets for nefarious purposes will be punished, she said. Sec. Yellen stated, "if people are breaking the law and exploiting the interests of others, they should be held accountable."
"Innovation that improves our lives while appropriately managing risks should be embraced. But we must also be mindful that “financial innovation” of the past has too often not benefited working families, and has sometimes exacerbated inequality, given rise to illicit finance risks, and increased systemic financial risk ," she continued.
By fLEXI tEAM