Treasury nominee Yellen wants to cut cryptocurrency usage

A woman in a white suit is talking in a podium.
Expand / Janet Yellen, Joe Biden’s nominee to be Treasury Secretary, at a press conference in December.

Cryptocurrencies could come under fresh regulatory scrutiny over the next four years if Janet Yellen, Joe Biden’s choice to lead the Treasury Department, gets in the way. During Yellen’s confirmation hearing on Tuesday before the Senate Finance Committee, Senator Maggie Hassan (DN.H.) asked Yellen about the use of cryptocurrency by terrorists and other criminals.

“Cryptocurrencies are a particular concern,” Yellen responded. “I think a lot are used – at least in a transactional sense – mainly for illegal financing.”

She said she wanted to “explore ways in which we can reduce their use and achieve that [money laundering] does not happen through those channels. “

Blockchain-based financial networks are attractive to criminals because they do not require consumers to identify themselves – as most conventional financial networks require. Because no individual or organization manages these networks, there is no easy way for governments to force them to comply with money laundering laws.

So instead of trying to force the networks themselves to comply, regulators in the US – and many other jurisdictions – have focused on regulating bitcoin exchanges that help consumers trade between dollars and cryptocurrencies. Once a bitcoin exchange initially identifies who received a particular bitcoin payment, law enforcement can often track subsequent payments through the blockchain network’s open payment ledger.


In December, Trump’s outgoing team at the Financial Crime Enforcement Network – a unit in the Treasury Department focused on money laundering – proposed a new set of rules to tighten the screws on cryptocurrency-based money laundering.

Under the new rules, cryptocurrency-based exchanges would need to file transaction reports with FinCEN any time a customer entered into a cryptocurrency transaction worth more than $ 10,000. This would reflect the current rules that require conventional banks to report when customers withdraw cash or deposits worth more than $ 10,000.

Even more controversial in the cryptocurrency world, FinCEN wants to impose new recordkeeping requirements for transactions involving users who control their own private keys – FinCEN’s “not replaced wallets”. Under the FinCEN proposal, if a cryptocurrency exchange customer sends more than $ 3,000 to an unsecured wallet, the exchange would be required to keep a record of the transaction, including the identity of the customer who initiated the payment.

These new rules did not come into effect before Trump left office, so the new Biden team will need to decide what to do with them. The Biden administration could sign the existing rules, rewrite them, or scrap them altogether. Yellen’s comments on Tuesday suggest the rules are unlikely to be scrapped. If anything, the Treasury Department is likely to consider additional regulations of the blockchain economy over the next four years.