Soon after West Virginia Democratic Senator Joe Manchin urged Treasury Secretary Jack Lew and Federal Reserve Chair Janet Yellen to ban bitcoins in the United States, Yellen delivered testimony to the Senate Banking Committee on Thursday in which she confirmed that the central bank does not have the authority to regulate the digital currency.
Manchin asked a series of questions regarding bitcoin and Yellen answered:
“Bitcoin is a payment innovation that’s taking place outside the banking industry,” said the Fed head. “To the best of my knowledge there’s no intersection at all, in any way, between bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the fed doesn’t have authority to supervise or regulate bitcoin in anyway.”
Yellen went on to reiterate many of the concerns that other central banks, public officials and financial institutions have: the potential for money laundering schemes and illicit transactions, particularly in the area of drugs.
When it comes to possible warnings and regulations, Yellen was pegged with the question if the U.S. was “behind the curve.” Yellen essentially responded that it is has no authority in regards to the virtual currency.
“But certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies…My understanding is bitcoin doesn’t touch [U.S.] banks,” stated Yellen. “It’s not so easy to regulate bitcoin because there’s no central issuer or network operator. This is a decentralized, global [entity]. We’re looking at this.”
Whether or not Yellen plans to launch a series of measures against bitcoin remains to be seen, but the Treasury Secretary has already hinted at coming bitcoin regulations on two separate occasions.
Bitcoin has experienced a tumultuous week: Mt. Gox, one of the biggest exchange platforms, declared bankruptcy, bitcoin dropped to around $400 and Vietnam declared a ban on all bitcoin transactions.
On top of this, there have been reports that the TSA is searching for international travelers with bitcoins. Be sure to read this article entitled “The TSA is looking for bitcoin.”
At the time of this writing, bitcoin is trading at around $560.