Treasury Secretary Janet Yellen Skeptical of Bitcoin

In some of her first remarks on the subject of digital assets since Senate confirmation, Treasury Secretary Janet Yellen sounded an alarm on Bitcoin. Her views on the regulation of digital assets more broadly are sure to influence policy in the coming years at the various offices and bureaus within the Treasury Department that oversee the asset class, including the OCC, IRS, OFAC and FinCen.

In a recent interview with CNBC’s Andrew Ross Sorkin, Secretary Yellen expressed her view that, “I don’t think that Bitcoin . . . is widely used as a transaction mechanism.” She continued, “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.” Secretary Yellen also noted that, “It is a highly speculative asset and . . . I think people should be aware it can be extremely volatile. I do worry about potential losses that investors can suffer.”

In response to questions for the record at her Senate confirmation hearing, Yellen was more measured in her assessment of digital assets, stating:

“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. 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. 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.”

Gary Gensler, the Administration’s nominee for SEC Chairman, faces a confirmation hearing on March 2, where he is also expected to field questions from senators about Bitcoin and other digital assets.