Andrew Harnik / ASSOCIATED PRESS
The appointed Treasury secretary, Janet Yellen, suggested that lawmakers should “reduce” the use of cryptocurrencies like Bitcoin, saying she is concerned that they are “mainly” used for illegal activities.
His comments came amid an increase in interest in Bitcoin, whose price rose by about 300% last year. Bitcoin’s price fell 7.59% to $ 34,183.57, while the price of rival cryptocurrency Ethereum fell 9.74% to $ 1,259.97, after reaching a record high of more than $ 1,430 yesterday.
But Yellen’s comments suggest that Joe Biden’s next administration may be hostile to cryptocurrencies and try to tighten regulations. Watchmen around the world, from the European Central Bank to the UK’s financial regulator, recently expressed concern about cryptocurrencies like Bitcoin.
Senator Maggie Hassan asked Yellen yesterday about the dangers of terrorists using cryptocurrencies during the Treasury confirmation hearing.
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Yellen said: “You are absolutely certain 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 the financing of terrorism, change along with technological changes.
“Cryptocurrencies are a particular concern. I think that many are used – at least in the transaction sense – mainly for illicit financing.
“And I think we really need to look at ways to restrict their use and make sure that money laundering doesn’t happen through these channels.”
Yellen’s comments echoed those of ECB President Christine Lagarde, who last week said Bitcoin had been used for “a totally reprehensible money laundering activity”.
Major investors also have similar concerns. Warren Buffet said last year that “Bitcoin has been used to move a good amount of money illegally”. He said investors should “sell 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 that they are neither regulated nor traceable, which makes them attractive to criminals.
However, supporters say the lack of central control makes them attractive in other ways. For example, they argue that Bitcoin can serve as protection against the devaluation of national currencies when central banks launch huge stimulus programs.
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Bitcoin bulls are extremely excited about the recent jump in cryptocurrency prices.
Paolo Ardoino, chief technology officer at crypto exchange Bitfinex, said: “The king of cryptography is the foundation layer for an emerging alternative financial system.
“Bitcoin is providing a solid foundation for an incredible variety of projects, some of which will fundamentally change the nature of money by the end of the decade.” Bitcoin products include funds and options.
However, regulators call for caution. Earlier this month, the UK Financial Conduct Authority warned that people who invest in cryptocurrencies like Bitcoin and Ethereum may “lose all their money”.