Fed Doesn’t Have Authority to Supervise or Regulate Bitcoin

In response to a letter sent yesterday from West Virginia Senator Joe Manchin [D] (which warned that Bitcoin could be used by criminals and could also disrupt the U.S. economy), Chair of the Board of Governors of the Federal Reserve System Janet Yellen has responded: and the long and short of it is that the Federal Reserve can’t really do anything about it.

“Bitcoin is a payment innovation that’s taking place outside the banking industry. 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. So the fed doesn’t have authority to supervise or regulate Bitcoin in anyway,” she wrote.

Yellen said that the Treasury’s Financial Crimes Enforcement Network (FinCEN) “has indicated their money laundering statutes are adequate to meet enforcement needs.”

On the topic of whether the U.S. is legging behind other governments in regulating and/or issuing warning, Yellen reiterated that “The Fed doesn’t have authority with respect to Bitcoin.”

“But certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies…My understanding is Bitcoin doesn’t touch banks [in the US].”

“It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator. This is a decentralized, global [system].”

Yellen did conclude that the Fed is looking at the digital currency — but for now, it doesn’t seem as if Manchin will be getting what he wants. [source: Business Insider]