CNBC’s Squawk Box recently interviewed current US Treasury Secretary (Janet Yellen) to get her thoughts on the burgeoning digital asset space, including the relationship between the Russia-Ukraine war and the global financial markets. Among other things, Yellen remarked that the crypto market has its benefits, but its drawbacks are more than its benefits.
Influencing Americans’ Investment Decisions
During the interview, Yellen spoke about Russia’s decision to accept BTC payments for exporting oil. Yellen opined that Russia had to decide after its removal from the global financial system. Thus, it cannot perform transactions in any fiat (including USD and EUR) across the world.
However, Yellen didn’t give a direct answer to the question. Instead, she said, “it is clear that the crypto market has grown sporadically in the last few years and plays a pivotal role in American’s investment decisions, but it has an almost insignificant effect on transactions.”
Yellen was right as 26% of American investors have BTC in their investment portfolio, with some considering it digital gold and not a means of financial settlement. But, the rising popularity of scaling solutions such as the lightning network would facilitate BTC adoption for transactions.
A recent Visa poll revealed that 26% of American SMEs are planning to start accepting crypto payments this year. Hence, the authorities are showing interest in the crypto space. Yellen cited the US president’s executive order as an example of government interest in the crypto sector. Yet, the US Treasury Secretary remains skeptical about blockchain technology and cryptocurrencies despite admitting that it has several benefits.
Yellen said part of its benefits include its supposed financial stability and hedge against fiat currency inflation. But it is also a well-known fact that criminals are also using it for illegal purposes. However, she noted that crypto’s innovative technology is a massive addition to the financial market.
Crypto As A Means Of Financial Stability Is Doubtful – Yellen
Over the last couple of months, financial regulators have expressed their doubts over the narrative that crypto provides financial stability. The BoE deputy governor, Jon Cunliffe, opined that the crypto market is too volatile to be regarded as a means of financial stability. According to Cunliffe, “integrating the crypto market with the traditional finance market can lead to a financial collapse.”
In the same vein, the IMF warned El Salvador that it is risking financial instability if it continues to use BTC as a legal tender. El Salvador’s BTC adoption of BTC as a legal tender was fueled by one of Yellen’s previous remarks about cryptos. At that time, she said, “cryptos can be widely accepted by the unbanked for financial settlements but not as a form of investment.”
During her interview, Yellen explained that the treasury is willing to provide suggestions on the appropriate crypto policy to enhance innovation in the space without risking the law. She also said her department is making efforts to protect itself against cyberattacks.