“Bitcoin is a payment innovation that’s taking place outside the banking industry,” Yellen explained. “To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate.”
Yellen also noted that while money laundering is a potential issue with Bitcoin, the Treasury’s Financial Crimes Enforcement Network (FinCEN) has indicated “their money laundering statutes are adequate to meet enforcement needs.”
That didn’t seem to appease Manchin, however, who followed up by asking if the U.S. is “behind the curve” on warnings or regulation for Bitcoin. Yellen didn’t seem convinced, but did concede that it would be “appropriate for Congress to ask questions about what the right legal structure would be for digital currencies.”
Yellen also noted that attempting to regulate Bitcoin could be problematic, as the decentralized structure makes enforcement of any regulation particularly difficult. “It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator.”
Yellen’s position on Bitcoin is vital to the rapidly developing ecosystem of regulations and government policies shaping the virtual currency’s future in the U.S. This marks the first time that Yellen, who was appointed in October to replace Ben Bernanke, has weighed in publicly on the subject.