Andrew Harnik / ASSOCIATED PRESS
Janet Yellen, the presidential candidate Joe Biden’s nominee for treasury secretary, on Tuesday suggested that lawmakers “restrict” the use of cryptocurrencies such as bitcoin because of concerns that it is being used “primarily” for illegal activities.
There has been an increase in interest in bitcoin; its price has risen by about 300% in the past year. Bitcoin fell 7.59% to $ 34,183.57 on Wednesday, while Ethereum fell 9.74% to $ 1,259.97 after hitting more than $ 1,430 on Tuesday.
Yellen’s comments suggested that the incoming Biden administration could be hostile to cryptocurrencies and 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.
Sen. Maggie Hassan questioned Yellen on Tuesday during her confirmation hearing about the dangers of terrorists using cryptocurrencies.
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“You completely seemed 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,” Yellen said.
“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 said last week that Bitcoin was being used for a “totally reprehensible money laundering activity.”
Major investors have expressed 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 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.
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But their lawyers say the lack of central control makes them attractive in other ways. They argue, for example, that Bitcoin can protect against the devaluation of national currencies when central banks launch major stimulus programs.
Bitcoin bulls are very excited about the recent rise in the price of the crypto-currency.
“The king of crypto is the base layer for an emerging alternative financial system,” said Paolo Ardoino, chief technology officer at crypto exchange Bitfinex.
“Bitcoin provides a solid foundation for a staggering array of projects, some of which will fundamentally change the nature of money by the end of the decade,” Ardoino added. Bitcoin products include funds and options.
Regulators urged caution. Earlier this month, the UK’s Financial Conduct Authority said people investing in cryptocurrencies such as Bitcoin and Ethereum could very well lose all their money.
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