Fed Doesn’t Have Authority to Regulate Bitcoin, Yellen Says

The central bank’s chief says it’s not so easy to regulate the virtual currency, because there’s no central issuer or network operator.

James MacWhyte, a member of bitcoin trading club poses with bitcoin medals at the club's meeting in Tokyo on February 27, 2014.
National Journal
Catherine Hollander
Feb. 27, 2014, 7:08 a.m.

The Fed­er­al Re­serve Board doesn’t have the au­thor­ity to reg­u­late bit­coin, Fed Chair Janet Yel­len said Thursday.

“To the best of my know­ledge, there’s no in­ter­sec­tion at all in any way between bit­coin and banks the Fed­er­al Re­serve has the abil­ity to su­per­vise or reg­u­late,” Yel­len told mem­bers of the Sen­ate Bank­ing Com­mit­tee. “The Fed­er­al Re­serve simply does not have au­thor­ity to su­per­vise or reg­u­late bit­coin in any way.”

Yel­len was re­spond­ing to ques­tion­ing from Sen. Joe Manchin, D-W.Va., who sent the Fed and oth­er bank­ing reg­u­lat­ors a let­ter on Wed­nes­day call­ing on them to ban — or at least curb — the de­cent­ral­ized, vir­tu­al cur­rency’s use in the United States. Manchin has ex­pressed con­cerns about bit­coin’s an­onym­ity mak­ing it ap­peal­ing for crim­in­als.

“It cer­tainly would be ap­pro­pri­ate, I think, for Con­gress to ask ques­tions about what the right leg­al struc­ture would be for, you know, vir­tu­al cur­ren­cies that in­volve non­tra­di­tion­al play­ers,” Yel­len said. The Sen­ate Home­land Se­cur­ity and Gov­ern­ment­al Af­fairs Com­mit­tee is put­ting to­geth­er a re­port on vir­tu­al cur­ren­cies, a com­mit­tee aide said in an email Wed­nes­day.

Bit­coin was in­tro­duced by a pro­gram­mer or pro­gram­mers by the name of Satoshi Na­kamoto in 2009. There is no cent­ral is­suer of the crypto­cur­rency, which is “mined” by com­puters as they solve com­plex math equa­tions. “It’s not so easy to reg­u­late bit­coin, be­cause there is no cent­ral is­suer or net­work op­er­at­or to reg­u­late,” Yel­len said Thursday.

The Fed chair was ap­pear­ing be­fore the com­mit­tee to de­liv­er her semi­an­nu­al mon­et­ary policy re­port to Con­gress.

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