The Bitcoin exchanges’ crisis is deepening and a lot of hue and cry is being made by the customers who have lost their money. Amidst the news that the Manhattan attorney Preet Bharara subpoenaed Bitcoin exchange Mt. Gox and other agencies to know about the state of affairs, Janet Yellen, the new head of the Fed, says that the US central bank has no authority to supervise or regulate Bitcoin.
Talking to media people, the new chair Janet Yellen said that the Congress should look into legal options for overseeing virtual currencies. Though the previous head of the Fed Bernanke was quite optimistic about Bitcoin, the kind of issues Bitcoin exchanges have faced and the kind of losses Bitcoin customers who have lost their investments, might have forced him to think otherwise.
Customers came to protest against Mt. Gox, the Japan–based Bitcoin exchange which went dark on Tuesday and left customers unable to access their accounts. According to some estimates 744,000 Bitcoins (around £210m) may have been stolen over several years due to a security loophole at the Tokyo-based company.
Mt. Gox which was the first Bitcoin exchange to come to existence had a good reputation among Bitcoiners; however, now it looks, it won’t be able to restore that trust. On the other hand, on the issue of the latest hacking incidences in Bitcoin exchanges, Ms Yellen said the Federal Reserve had no jurisdiction over Bitcoins.
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She said that Bitcoins are created using a network of computers that solve complex mathematical problems and are not traded or held by banks. Also, as Bitcoin is a payment innovation that’s taking place outside the banking industry and to the best of her 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.
Nonetheless, she also rues that the Fed doesn’t have the authority with regard to Bitcoin; however, at the same time she said that she would appropriate if Congress answers some of her questions about what the right legal structure would be for virtual currencies that involve non–traditional players.
On the other hand, the voices of protests coming out, the first protest came from Senator Joe Manchin who wrote to the Fed and other regulators warning that the currency was “disruptive to our economy” and calling for its regulation.
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