By Peter Schroeder - 02/27/14 01:29 PM EST
The Federal Reserve has no jurisdiction over the virtual currency bitcoin and the job of policing wrongdoing in that area should fall to the Justice Department, according to Fed Chairwoman Janet Yellen.
Testifying before the Senate Banking Committee, Yellen said that since bitcoin does not intersect with the traditional banking system, the Fed has no oversight over it.
Yellen addressed the virtual currency after being asked about it by Sen. Joe Manchin (D-W.Va.), a committee member who called for regulators to ban the currency.
Manchin said he fundamentally believed bitcoin was used to facilitate illegal activities and money laundering.
But Yellen said such matters would fall to the Justice Department and the Financial Crimes Enforcement Network within the Treasury Department. And it appears they have the tools they need to monitor the new, unregulated and controversial form of currency.
“They have indicated that their money laundering statutes are adequate to meet their own enforcement needs,” she said.
At the same time, Yellen invited lawmakers to consider passing legislation to address the currency if they had concerns.
“It certainly would be appropriate, I think, for Congress to ask questions about what the right legal structure would be for virtual currencies that involve nontraditional players,” she said.
Bitcoin has attracted headlines in recent days, after one of its major exchanges, the Japan-based Mt. Gox, apparently collapsed and disappeared, taking hundreds of millions of dollars worth of bitcoins with it. Several nations have expressed concern about the currency, with some effectively banning its use within its borders.