Industry headlines and market analysts this week have been focused on future US Treasury Secretary Dr. Janet Yellen. No doubt, you will have already read that she called cryptocurrencies a “particular concern,” saying they are used “mainly for illicit financing.” Indeed these words did leave her mouth and certainly were circulated to every corner of the internet. But if you take the one minute and forty seconds to watch the full question from Senator Maggie Hassan before Dr. Yellen’s full answer, is that really her meaning, once placed in context?
Anyone passionate about understanding the future of a digital economy should watch the unedited, non-cherry picked, and rather short exchange. Considering these people will be two of the most significant policy makers shaping the future of cryptocurrency regulation, it is worth scrutinizing their words in context:
Several news outlets found the lowest hanging fruit and mischaracterized her response. Wired, Business Insider, Forbes conveniently left the “terrorist and criminal financing” context from their headlines. Did they not feel this was relevant? Do you?
Tracking illicit use of cryptocurrencies has been the focus of several firms working alongside government agencies for years. Blockchain analytics firms such as Elliptic, CipherTrace, and Chainalysis use data science to reliably track and trace crypto payments used for illicit services. They have already demonstrated their capabilities. Yet, these firms themselves find that “Illegal Services” accounted for just 0.34% of all crypto transactions in 2020 (Chainalysis).
For those interested, Chainalysis also breaks down the types of these “Illicit Services,” as seen in their graph below:
Has the discussion of Yellen's comments focused on her thoughts regarding this 0.34% or the other 99.66% that is legal?
Would greater regulation and prosecution of these illegal activities (scams and pot market places being just the tip of the iceberg) drive adoption or undermine the value of legal transactions? Would restrictive or supportive crypto / blockchain regulation be the focus of Yellen tenure?
These are the questions absent from the headlines but critical to the future of Digital Assets. So misconstrued were her words that Dr. Yellen responded to the Senate Finance Committee, acknowledging the “need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities” (Report).
With such a fractional amount of transactions taking place within the illicit context of Dr. Yellen’s answer, will her position stifle adoption or ignite growth? How will long term prices and technologies evolve in this environment? The much anticipated regulation of Digital Assets is soon coming into view under US Treasury Secretary Janet Yellen.
Daniel Pinto - Market Analyst @ TradingBull.io
