Andrew Harnik / ASSOCIATED PRESS
Janet Yellen, named as President-elect Joe Biden as Treasury Secretary, suggested on Tuesday that lawmakers “reduce” the use of cryptocurrencies like bitcoin because of concerns that they will be used “mainly” for illegal activities.
There has been an increase in interest in bitcoin; its price soared about 300% last year. Bitcoin fell 7.59%, to $ 34,183.57, on Wednesday, while Ethereum fell 9.74%, to $ 1,259.97, after reaching a historical record of more than $ 1,430 on Tuesday.
Yellen’s comments suggested that the next Biden government could be hostile to cryptocurrencies and increase regulation. 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 during her confirmation hearing on Tuesday about the dangers of terrorists using cryptocurrencies.
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“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 the ever-changing technology,” said Yellen .
“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 said last week that Bitcoin had been used for “a totally reprehensible money laundering activity”.
Major investors have expressed similar concerns. Warren Buffet said last year that “Bitcoin has been used to move a fair amount of money illegally.” He said investors should “buy 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 that they are neither regulated nor traceable, which makes them attractive to criminals.
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But their supporters say the lack of central control makes them attractive in other ways. For example, they argue that Bitcoin can protect against the devaluation of national currencies when central banks launch huge stimulus programs.
Bitcoin bulls are extremely excited about the recent jump in cryptocurrency prices.
“The crypto king is the base layer for an emerging alternative financial system,” said Paolo Ardoino, chief technology officer at crypto exchange Bitfinex.
“Bitcoin is providing a solid foundation for an impressive series of projects, some of which will fundamentally change the nature of money by the end of the decade,” added Ardoino. Bitcoin products include funds and options.
Regulators asked for caution. Earlier this month, the UK Financial Conduct Authority said people who invest in cryptocurrencies like Bitcoin and Ethereum can “lose all their money”.
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