Diehard bitcoin believers can rest easy (for now). According to its new chair, Janet Yellen, the Federal Reserve will not regulate bitcoin. During her Senate Banking Committee hearing on Thursday, Yellen clarified the Fed's position on digital currencies for Sen. Joe Manchin. Manchin has asked federal regulators to ban the digital currency to "prohibit this dangerous currency from harming hard-working Americans." Yellen says the Fed can't do that.
"Bitcoin is a payment innovation that's taking place outside the banking industry," she 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. So the fed doesn't have authority to supervise or regulate Bitcoin in anyway." This makes bitcoin users very happy.
In response to Yellen's statement, one bitcoin user posted on Reddit, "Well Manchin must feel like an idiot." According to users, Manchin doesn't get that the best thing about bitcoin is that it's unregulated. As another Reddit poster explained Thursday on the r/bitcoin forum:
These people [the government] built the ponzi scheme which IS the USD and they will not just allow something useful to others to go free. It must be tamed, trained and put back into the world as a weapon against liberty, like all other currencies. [Manchin] is a living joke.
This is not an extreme statement compared to most of what's on the r/bitcoin forum. Bitcoin users really do think the dollar is broken, and they insist that digital currency is the only way people can break free from a tainted system. If the government regulates bitcoin, it will ruin it. So Yellen's statements are a big "win" for bitcoin fans who think Manchin needs to stay out of their business.
But Yellen isn't exactly hailing bitcoin as the currency of the future. She pointed out that it has "the potential for money laundering." There's just nothing the Fed can do about it. Her final statement on the matter is this:
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 [U.S.] banks.
So while bitcoin users can celebrate Yellen's "Xcellent zing!" against Manchin now, they shouldn't expect worries about the currency to go away. After news broke earlier this week that possibly $280 million was stolen from one of bitcoin's largest trading sites, Mt. Gox, the currency's problems have become too big to ignore.
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.