Treasury secretary nominee Janet Yellen has suggested that legislators should “curtail” the use of cryptocurrencies such as Bitcoin, saying she is concerned that they are being used “mainly” for illegal activities.
His comments come in the midst of a surge of interest in Bitcoin, with its price soaring around 300% in the past year. Bitcoin’s last price was down 7.59% to $ 34,183.57, while Ethereum’s cryptocurrency competitive 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 that Joe Biden’s new administration may be hostile to cryptocurrencies and try to ramp up regulation. Guardians around the world, from the European Central Bank to the UK’s financial regulator, have recently expressed concern about cryptocurrencies such as Bitcoin.
Yesterday Senator Maggie Hassan asked Yellen about the dangers of terrorists using cryptocurrencies during a final Treasury confirmation hearing.
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Yellen said: “You are quite right that the technologies to achieve this change over time, and we need to ensure that our approaches to dealing with these issues, with terrorist financing, change along with technology that n change.
“Cryptocurrencies are a particular concern. I think many are used – at least in a transaction sense – primarily for illegal financing.
“And I think we really need to explore ways in which we can reduce their use and make sure money laundering doesn’t happen through those channels.”
Yellen’s comments echoed those of ECB president Christine Lagarde, who said last week that Bitcoin had been used for some “completely understandable money laundering activity”.
Big investors also have similar concerns. Warren Buffet said last year that “Bitcoin has been used to move around a fair amount of money illegally”. He said investors should “take shortcuts” as criminals will no longer need to carry cash.
Cryptocurrencies are digital currencies that have no physical form and are not controlled by a central authority such as a central bank. This means that they are largely unregulated and untreated, making them appealing to criminals.
Yet, their advocates say that a lack of central control makes them attractive in other ways. For example, they argue that Bitcoin can serve as protection against national currency ruin when central banks launch massive leverage programs.
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Bitcoin bulls are very excited by the recent jump in the price of cryptocurrency.
Paolo Ardoino, chief technology officer at the Bitfinex crypto exchange, said: “The king of crypto is the foundation layer for an emerging alternative financial system.
“Bitcoin provides a solid foundation for an astonishing 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 “lose all their money”.