Treasury secretary nominee Janet Yellen has suggested lawmakers should “curtail” the use of cryptocurrencies such as Bitcoin, saying she is concerned that they are “mainly” used for illegal activities.
Her comments come amid a surge of interest in Bitcoin, with its price soaring around 300% in the last year. The Bitcoin price was last down 7.59% to $34,183.57, while rival cryptocurrency Ethereum’s price was down 9.74% to $1,259.97, after hitting an all-time high of more than $1,430 yesterday.
But the comments from Yellen suggest the incoming administration of Joe Biden could be hostile to cryptocurrencies and attempt to ramp up regulation. Watchdogs around the world, from the European Central Bank to the UK’s financial regulator, have recently expressed concern over cryptocurrencies like Bitcoin.
Senator Maggie Hassan yesterday asked Yellen about the dangers of terrorists using cryptocurrencies during the latter’s Treasury confirmation hearing.
Yellen said: “You’re absolutely right that the technologies to accomplish this change over time, and we need to make sure that our methods for dealing with these matters, with terrorist financing, change along with changing technology.
“Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – mainly for illicit financing.
“And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”
Yellen’s comments echoed those of ECB president Christine Lagarde, who last week said Bitcoin had been used for some “totally reprehensible money laundering activity”.
Major investors also have similar worries. Warren Buffet said last year that “Bitcoin has been used to move around a fair amount of money illegally”. He said investors should “go short suitcases” as 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 they are largely unregulated and untraceable, making them appealing to criminals.
Yet their advocates say the lack of central control makes them attractive in other ways. For example, they argue Bitcoin can serve as protection against the debasement of national currencies when central banks launch huge stimulus programs.
Bitcoin bulls are hugely excited by the recent jump in the cryptocurrency’s price.
Paolo Ardoino, chief technology officer at crypto exchange Bitfinex, said: “The king of crypto is the base layer for an emerging alternative financial system.
“Bitcoin is providing 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.” Bitcoin products include funds and options.
Yet regulators urge caution. Earlier this month, the UK’s Financial Conduct Authority warned that people who invest in cryptocurrencies like Bitcoin and Ethereum could well “lose all their money”.