Treasury Secretary Janet Yellen says a central bank digital currency must support the US dollar's global dominance

• Any US central bank digital currency must support the dominance of the dollar, Treasury Secretary Janet Yellen said Thursday.
• A CBDC "could become a form of trusted money comparable to physical cash" and offer some of the benefits of digital assets, Yellen said.

Treasury Secretary of the Janet Yellen explained Thursday that any implementation of a US central bank digital currency must support the prominent role the dollar plays in the global financial system.

In prepared remarks for her first speech on digital assets, Yellen said Thursday that a CBDC "could become a form of trusted money comparable to physical cash" and offer some of the benefits of digital assets.

She also pointed out that dollars account for nearly 90% of foreign transactions and that dollar-denominated assets account for roughly half of cross-border bank claims. She listed a series of questions that President Biden's recent executive order on crypto raised, including how a US CBDC would interact with national currencies, other countries' CBDCs, or private stablecoins.

"We need to consider these important questions in the context of the central role the dollar plays in the world economy," said Yellen.

She also noted that Americans enjoy economic and national security benefits from the role that the dollar and US financial institutions play around the world, adding that the executive order "asks us to consider whether and how the issuance of a public CBDC would support this role."

While she noted that she supports innovation in the sector, she cautioned that any developments must remain consistent with American values and laws. Issuing a US CBDC would also take years of development, not months, she added.

"I share the president's urgency in pulling forward research to understand the challenges and opportunities a CBDC could present to American interests," Yellen said.