“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,” the written testimony reads. “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?” the finance committee asked the Treasury Secretary nominee.
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.
Yellen’s clarification marginally softens her stance on cryptocurrency, contrasting her previous statements made during her confirmation Senate hearing. “Cryptocurrencies are a particular concern. I think many are used … mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering (sic) doesn’t occur through those channels,” Yellen said a few days prior.
Last week, the president of the European Central Bank (ECB), Christian Lagarde, also made a statement about bitcoin that drew much criticism. She said bitcoin “has conducted some funny business and some interesting and totally reprehensible money laundering activity.” Many were also quick to point out how wrong Lagarde was, including a famed economist who said her statement was “outrageous.” He stressed that “we all know that the vast majority of money laundering globally is conducted in fiat currencies, particularly in U.S. dollars and euros.”
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