Yellen: Federal Reserve Has No Business Regulating Bitcoin

Thursday Federal Reserve Chair Janet Yellen
demonstrated a stronger grasp of Bitcoin than the senator who
proposed banning it. In comments
to the Senate Banking Committee, Yellen stated, “The Federal
Reserve simply does not have the authority to supervise or regulate
Bitcoin in any way.” She also expressed doubts about any
regulator’s ability to manage the decentralized currency.

Wednesday Sen. Joe Manchin (D-WV)
addressed a letter to the U.S. Treasury, Federal Reserve,
Security and Exchange Commission, and a few other regulatory
agencies, requesting a wholesale ban on digital currencies. Manchin
cited the criminal behavior facilitated by Bitcoin. On the other
hand, Manchin didn’t propose banning, you know, cash. And he left
out the revolutionary benefits of a peer-to-peer
platform. 

Reasoning that the U.S. should follow China’s lead, he wrote, “I
urge the regulators to work together, act quickly, and prohibit
this dangerous currency from harming hard-working Americans.”

On Thursday, Yellen responded to the request. She said that the
currency does’t fall under the central bank’s jurisdiction, but
other financial regulatory agencies could work in conjunction with
the legislature to implement rules. However, she
told the Senate Committee:

I think it’s not so easy to regulate Bitcoin because there’s no
central issuer or network operator to regulate.

Yellen’s successor, Ben Bernanke, espoused
a similar approach in a letter to U.S. Senators last November.
After acknowledging that the central bank doesn’t have the
authority, he wrote that cryptocurrencies “may hold long-term
promise, particularly if the innovations promote a faster, more
secure and more efficient payment system.”

The most recent demands for regulation come amidst a
particularly turbulent era for Bitcoin. Bitcoin’s former king
exchange, Mt. Gox filed bankruptcy with Japan Friday morning.
Mid-Feburary a few of the major exchanges – Bitstamp, BTC-e, Mt.
Gox – suffered through a DDoS attack and Russia “banned”
Bitcoin. The digital currency has countenanced bad news layered
upon bad news. Despite these struggles, the price hovers around the
$500-700 range.

While Yellen said the Federal Reserve doesn’t have the
authority, she
assured senators that the central bank was still looking into
the matter.