In her statements today, US Treasury Secretary Janet Yellen touched upon the country's economic problems, especially the $33 trillion national debt, and the need for regulation in the cryptocurrency sector.
Yellen acknowledged that the changing financial environment could force policymakers to deal more quickly with the economic effects of the U.S. national debt. Rising interest rates and yields approaching historic highs, combined with recent stress in the bond market, have policymakers worried that federal payments on U.S. debt could soon pose a real drag on the economy's long-term growth.
The United States spent $659 billion on bondholder payments in fiscal year 2023; that's nearly double fiscal 2020's $345 billion total.
Despite these difficulties, Yellen argued that the Biden administration is taking the budget deficit seriously, citing budget proposals that would reduce the budget deficit by several trillion dollars over the next 10 years. However, he also noted that a sustained rise in interest rates would pose a “bigger challenge” for policymakers.
“Additional deficit reduction would be appropriate,” Yellen said and added:
“The President has proposed this, and we stand ready to work with Congress to look for ways to enact it.”
“Stablecoins May Create Unprecedented Financial Risks”
On the subject of cryptocurrencies, Yellen echoed congressional Democrats' concerns about one of the central pillars of the Republican approach to crypto reform. The Treasury Secretary has been asking Congress for years to pass legislation regulating stablecoins, arguing that such stablecoin products could pose unprecedented financial stability risks.
Yellen emphasized the importance of federal oversight in regulating stablecoins. The Republican approach, on the other hand, would limit the FED's direct control over state-based stablecoin companies.
Yellen said the following about cryptocurrencies and stablecoins:
“It is critical that the federal government essentially has a role in providing a basis for what is an acceptable level of regulation regarding stablecoins. “The idea of just having state regulations and no federal role bothers me.”
*This is not investment advice.