Yellen Signals Heavy Regulation of Cryptocurrencies Is Coming

(Economic Policy Journal) On Tuesday and Wednesday of this week, a new department inside the Treasury met for the first time, the Financial Sector Innovation Policy Roundtable.

The Roundtable consisted of the insider crowd. It brought together policymakers and regulators with connected individuals from the private sector.

Among other topics, participants discussed how governments across the world can work domestically and cooperate internationally to develop and implement new financial and regulatory tools in the era of digital finance, and drive adoption of trustworthy and cutting-edge digital identity solutions to combat money laundering and the financing of terrorism and other crimes.

Treasury Secretary Yellen spoke to the Roundtable and brought the idea of more government regulation of cryptocurrencies down to the goal line. 

From her comments:

When Congress passed the Anti-Money Laundering Act in December, it gave our Department a mandate: to renovate the framework for combating illicit finance. That framework was designed in the ‘70s – and has been more or less the same ever since…

By working together, we can better stem the flow of dark money from organized crime and terrorist financiers. We’ll be better able to spot criminals who want to sell weapons of mass destruction on the black market. And we’ll be better positioned to stop adversaries from hacking our institutions or interfering in our elections.

The update couldn’t have come at a better time. As this group knows very well, we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy. As the pandemic has moved more of life online, crime has moved with it. We’re seeing more – and more sophisticated – cyberattacks aimed at institutions that hold up our society: hospitals, schools, banks, and even our government.

The misuse of cryptocurrencies and virtual assets is a growing problem, too. I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorists.

Of course, governments always couch greater intrusions on privacy as a battle against terrorism.

They are going to make cryptocurrencies the most trackable monetary instruments known to man. And then, when the Fed is ready to launch its own digital currency, they will know just how to force the conversion of all cryptocurrencies into Fed coin.

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