Janet Yellen Confusing Stance on Cryptocurrency Creates Mixed Feelings

Janet Yellen, the new Treasury Secretary of the United States, response to Senator Maggie Hassan question on cryptocurrency being used by terrorists and criminals has created mixed feelings across the crypto space.

Before the Senate Finance Committee, Yellen said “Cryptocurrencies are a particular concern. I think many are used—at least in a transactions sense—mainly for illicit financing.”

She further stated that she wanted to “examine ways in which we can curtail their use and make sure that [money laundering] doesn’t occur through those channels.”

Yellen’s response plunged Bitcoin and other cryptocurrencies as investors interpreted it as ‘Biden administration going after cryptocurrency holders’.

Janet Yellen later clarified her response following the huge media coverage her response got and the resulting negative impact on the price of Bitcoin and other cryptocurrencies.

In the written testimony, the finance committee later asked her “Bitcoin and other digital and cryptocurrencies are providing financial transactions around the globe, like many technological developments, this offers potential benefits for the U.S., and our allies. At the same time, it also presents opportunities for states and non-state actors looking to circumvent the current financial system and undermine American interests. For example, the Central Bank of China just issued its first digital currency.”

“Dr. Yellen, what do you view as the potential threats and benefits these innovations and technologies will have on U.S. national security? Do you think more needs to be done to ensure we have appropriate safeguards and regulations for digital and cryptocurrencies in place?” 

Yellen replied: “I think it important we consider the benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.”

She continued, “At the same time, we know they can be used to finance terrorism, facilitate money laundering, and support malign activities that threaten U.S. national security interests and the integrity of the U.S. and international financial systems,” elaborating:

“I think we need to look closely at how to encourage their use for legitimate activities while curtailing their use for malign and illegal activities.”

“If confirmed, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations,” Yellen concluded.

In December, the Securities and Exchange Commission (SEC) filed a lawsuit against the world’s third most capitalised cryptocurrency, Ripple (XRP) to change its operation as currency.

The uncertainty surrounding what the new administration might do to regulate the crypto space continues to weigh on the cryptocurrencies.