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Yellen responds to Senate questions on digital assets

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President Biden’s pick for U.S. Secretary of the Treasury Janet Yellen endured a lengthy senate nomination hearing on Wednesday where the questions only briefly touched on digital assets. However, she stated that cryptocurrencies are “mainly for illicit financing” and commented that there’s a “need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”

The senators submitted more detailed written questions as a follow up and the answers to these were published yesterday and signaled a slightly more accommodating approach.

Asked by Senator Daines about plans to ensure the U.S. remains a global financial services leader, Yellen concurred that the U.S. must lead in digital asset and financial technology areas.

“This requires us to develop a regulatory framework that fosters innovation and promising new technologies while addressing legitimate concerns,” said Yellen, and she commented that she looks forward to implementing such a framework.

Daines also asked about Secretary Mnuchin’s proposed FinCEN rules on digital assets, which effectively require a level of KYC on not just the customer but the customer’s counterparty. The rulemaking consultation period was initially somewhat abridged and the Treasury also commented that it wasn’t required to consult because it is a national security issue. Yellen said she’d review the proposals, including considering how to ensure input from stakeholders. 

Senator Young asked about the threats and benefits of cryptocurrencies and digital assets. “I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system,” wrote Yellen. “I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities.” 

In other news, Biden’s pick for the Comptroller of the Currency is expected to be Michael Barr, a former adviser to Ripple and a keen proponent of financial inclusion.