Quick take:
- US Treasury Secretary Yellen has stated that a Central Bank Digital Currency (CBDC) could diminish the proliferation of stablecoins
- She also mentioned that both could coexist as stablecoins could offer faster, efficient, and cheaper alternatives to a CBDC by the US Fed
US Treasury Secretary Yellen has floated the idea that a Central Bank Digital Currency could diminish the proliferation of stablecoins. In addition, she explained that a Central Bank Digital Currency could coexist with stablecoins in the right environment.
Madam Secretary Yellen made the comments during a Financial Services hearing by the U.S House Committee on ‘The Annual Report of the Financial Stability Oversight Council’, and after Congressman Stephen Lynch asked whether the over 200 stablecoins currently in circulation could survive the emergence of a Central Bank Digital Asset issued by the US Federal Reserve.
In her response, US Treasury Secretary Yellen said:
I think a benefit of issuing a Central Bank Digital Currency would be, that it might diminish the proliferation of these stablecoins, but it depends on the design…exactly how the Central Bank Digital Currency is introduced…there are issues around that…privacy is an issue with the Fed amassing [consumer] data.
But there could continue to be stablecoins that co-exist with a central bank digital currency. They may offer some benefits in terms of faster and more efficient and cheaper payments. I think we should be open to innovation…
A Comprehensive Framework on Digital Assets is Needed
Earlier and during the same Committee hearing, Congressman Jim Himes asked US Treasury Secretary Yellen when she thought the rise of digital assets should start raising red flags. Congressman Himes cited the 2008 financial meltdown and asked when the total market cap of cryptocurrencies should start being a concern. In response, US Treasury Secretary Yellen stated the following:
I cannot give you a numeric cut off [based on market capitalization], but what I do see is that the use of digital assets is rising very rapidly, that they present the same risks, run risks, payment risks, and really, we need a comprehensive framework so that there are no gaps in regulation.
