• Janet Yellen has admitted that Treasury recognizes there are healthy innovations in crypto which she says can be a healthy thing after years of bashing Bitcoin.
• However, she admits that there are gaping concerns related to financial stability, investor protection, and their use for illicit transactions.

The most powerful person in the American financial ecosystem has admitted that she sees healthy innovation in the world of cryptocurrencies which can be a healthy thing moving forward. Janet Yellen, the Treasury Secretary, however, admits that she still has concerns over the widespread use of digital assets.

Yellen has never been a fan of crypto. During her tenure as the chair of the Federal Reserve, she was an outspoken critic of crypto, at one point openly stating that she’s not a fan of Bitcoin. In February last year, she told the New York Times that Bitcoin is “an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”

However, as she now tells CNBC, she has slightly changed her mind on BTC. In an interview on Friday, she noted:

Crypto has obviously grown by leaps and bounds, and is now playing a significant role not really so much in transactions but in investment decisions of lots of Americans.

She further referenced President Joe Biden’s executive order on crypto, which she has previously praised as important to protect American investors.

Related: Janet Yellen’s comments on crypto executive order leaks before schedule, crypto market rallies

“I have a little bit of skepticism because I think there are valid concerns about it,” she went on. “Some have to do with financial stability, consumer/investor protection, use for illicit transactions and other things.”

On the other hand, there are benefits from crypto, and we recognize that innovation in the payment system can be a healthy thing.

This is a great step up from Yellen, an influential figure in global financial policies who has previously claimed that nobody uses Bitcoin for transactions, and when anybody ever does, “I fear it’s often for illicit finance.”

As she has always done, Yellen insisted on the need to regulate the nascent sector. So far, the U.S has yet to formulate comprehensive policies to govern crypto. Efforts have been made by individual agencies including the SEC, the CFTC, FinCEN, the DoJ, and the IRS. However, these efforts have been scattered and in some cases, even contradictory (such as the SEC and IRS definition of crypto).

We would like to come out with recommendations that will create a regulatory environment in which healthy innovation can thrive.