Janet Yellen
Photo: Stefani Reynolds/AFP/Getty Images

What Janet Yellen’s crypto speech really meant

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: Janet Yellen’s crypto speech, hollering at the HODLers in Miami, and “problem firms” in the U.K.

Off the chain

The return of Zuck Bucks is giving me flashbacks. I remember meeting David Marcus in 2010 when he was running a startup that let you buy Facebook Credits — currency used in Facebook games like FarmVille — on your phone. Facebook Credits didn’t last, but Facebook kept trying to find a winning business in payments. As I wrote yesterday, Meta Financial Technologies is the fourth incarnation of Facebook’s money-moving business by name, and probably the 10th or so by strategy. The real challenge for MFT to solve is presenting a value proposition beyond “we have a lot of users.” Otherwise they’re just back to throwing sheep, this time in the metaverse.

— Owen Thomas (email | twitter)

Crypto isn’t special

Treasury Secretary Janet Yellen just clarified the Biden administration’s view of crypto: “Digital assets may be new, but many of the issues they present are not.” Instead, as her department implements Biden’s recent executive order on cryptocurrencies, the focus will be on risks.

Crypto critics and supporters both found something to cheer about in the Biden order. But Yellen has turned the spotlight on a key question the industry might prefer the government not dwell on: What harm can crypto cause to consumers, businesses and investors?

Yellen says we’ve seen this movie before. “Innovation that improves our lives while appropriately managing risks should be embraced,” Yellen said.

  • She cited the examples of credit cards, ATMs, the internet and mobile phones.
  • But history has shown repeatedly that financial innovation can hurt working families, she said. In some cases, innovation benefits entrepreneurs and investors, while not leading to better lives for working people.
  • New technologies have led to the growth of online payments and ecommerce. But the inefficient U.S. banking system, which slows the arrival of paychecks in workers’ accounts, helped foster the growth of payday lending. Those fees add up to “essentially a tax of about $100 per working American, due mostly to inefficiency, and disproportionately borne by people with lower incomes,” she said.
  • The financial crisis of 2008-2009 was caused by institutions that spearheaded “an explosion of new financial products” which led to “dangerous levels of risks,” Yellen said. As a result, ordinary Americans “who’d never heard of a ‘shadow bank’ or a subprime mortgage-backed security ended up losing their jobs and life savings.”

“Regulation should be tech neutral,” Yellen said. Drafting rules for crypto “should be guided by the risks associated with the services provided to households and businesses, not the underlying technology.”

  • That’s not how most crypto companies see things. Regulation, they argue, should foster innovation. They worry that the government isn’t doing enough to make this happen. Coinbase is pushing for a new federal regulator dedicated to crypto because, the company argues, it is such a new, groundbreaking technology.
  • Yellen pretty much shot that idea down. Consumers should be protected from fraud “regardless of whether assets are stored on a balance sheet or distributed ledger,” she said. Money-laundering and other illicit activity should be deemed illegal, and “it doesn’t matter whether you’re using checks, wires or cryptocurrency.”
  • As with the Biden order, crypto critics and advocates saw something to cheer about in Yellen’s remarks. The Treasury secretary is “exactly right” that “we should embrace innovation that leads to better access for all Americans,” Kara Calvert, Coinbase’s head of U.S. Policy, said in a tweet. Santa Clara University law professor Stephen Diamond said Yellen’s comments underscore how the government already has “robust authorities to protect consumers and investors from the very real dangers that crypto schemes pose.”

Crypto regulation isn’t about protecting a $2 trillion industry. It’s about protecting those that unscrupulous or thoughtless actors might hurt. Crypto is growing rapidly and regulation has to keep pace with the innovation. For when that doesn’t happen, Yellen said, “vulnerable people often suffer the greatest harm.”

— Benjamin Pimentel (email | twitter)


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On the money

On Protocol: The U.K.’s Financial Conduct Authority is recruiting for 80 new roles to help shut down “problem firms,” which could include the crypto firms that haven’t gotten onto its permanent register.

All FDIC-supervised institutions must now report their crypto activities. The Federal Deposit Insurance Corporation is now asking all financial institutions under its supervision to report crypto-related activities, citing financial stability and safety concerns.

Robinhood widened access to its crypto wallet. Robinhood users can now send and receive crypto, and will soon be able to spend bitcoin on the cheaper, faster Lightning Network.

Strike signed up Shopify for Lightning payments. The partnership will diversify Shopify merchants’ payment options.

WeChat Pay is participating in the digital yuan pilot. China’s most popular social media app will support China’s central bank digital currency, the eCNY, as part of the program.


With Bitcoin 2022in full swing in Miami, there was no shortage of opinions about crypto.

Michael Saylor, CEO of MicroStrategy, appealed to the bitcoin HODLers at the conference when he stood up and wagged a finger at the audience. “My last point to you — you do not sell your bitcoin,” he said, to a wave of cheers from the crowd.

“Shark Tank” investor Kevin O’Leary was quoted back in 2019 saying that bitcoin was “a useless currency” and “garbage.” Evidently, he’s changed his mind. “In 10 years, crypto, blockchain and all of these types of assets will be the 12th sector of the S&P,” he said at his keynote address.

Ricardo Salinas Pliego, Mexico’s third-richest man and a bitcoin advocate, thinks there are many problems with the existing monetary system, which he called“the cult of central banking” and “fiat fraud.”

The chart

The stock market is fintech, right? One of the fascinating things to emerge from Elon Musk’s Twitter-share shopping spree was a belated SEC filing that gave day-by-day details on how many shares he bought and the price he paid. His purchases greatly accelerated after he crossed the 5% threshold that required public disclosure.


Get ready to live stream Plaid Forum 2022 on May 19. Join the world’s leading companies and build the future of digital finance. Registration is now open!

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Thanks for reading — see you Monday!

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