Andrew Harnik / ASSOCIATED PRESS
Treasury nominee Janet Yellen has suggested that lawmakers should “curtail” the use of cryptocurrencies such as Bitcoin, saying she is concerned that it is being used “primarily” for illegal activities.
Her remarks come amid a rise in interest in Bitcoin, with the price rising by about 300% over the past year. The Bitcoin price last fell 7.59% to $ 34,183.57, while the competing cryptocurrency Ethereum’s price fell 9.74% to $ 1,259.97, after reaching an everyday high of more than $ 1,430 yesterday has.
But Yellen’s comments suggest that Joe Biden’s incoming administration may be hostile to cryptocurrencies and trying to increase regulation. Watchdogs around the world, from the European Central Bank to the UK financial regulator, have recently expressed concern about cryptocurrencies such as Bitcoin.
Senator Maggie Hassan questioned Yellen yesterday about the dangers of terrorists using cryptocurrencies during the latter’s confirmation hearing on the treasury.
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Yellen said: ‘You have completely seen that the technologies to bring about this change over time, and we need to make sure that our methods of dealing with these issues, with terrorist financing, change along with changing technology.
“Cryptocurrencies are of particular concern. I think many are – at least in a transactional sense – used primarily for illegal financing.
“And I think we really need to explore ways to limit its use and make sure money laundering doesn’t happen through the channels.”
Yellen’s remarks reflect the comments of ECB President Christine Lagarde, who last week said Bitcoin was being used for a “totally reprehensible money laundering activity”.
Large investors also have similar concerns. Warren Buffet said last year that “Bitcoin was used to move a fair amount of money around illegally”. He said investors should “go short on bags” because criminals will no longer need them to carry cash.
Cryptocurrencies are digital currencies that have no physical form and are not controlled by a centralized authority such as a central bank. This means that they are largely unregulated and undetectable, which attracts them to criminals.
However, their lawyers say that the lack of central control makes them attractive in other ways. They argue, for example, that Bitcoin could serve as protection against the devaluation of national currencies when central banks launch major stimulus programs.
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Bitcoin bulls are very excited about the recent rise in the price of the crypto-currency.
Paolo Ardoino, chief technology officer at Bitfinex crypto exchange, said: ‘The king of crypto is the base layer for an emerging alternative financial system.
“Bitcoin provides a solid foundation for a staggering array of projects, some of which will fundamentally change the nature of the money by the end of the decade.” Bitcoin products include funds and options.
Yet regulators are vigilant. Earlier this month, the UK’s Financial Conduct Authority warned that people investing in cryptocurrencies such as Bitcoin and Ethereum could lose all their money.