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Yellen on Bitcoin: Fed Doesn’t Have Authority to Regulate It in Any Way
- SeanLuke 13y agoThis is an amazingly misleading article. What Yellen said was: the Fed only has the authority to regulate banks, and if Bitcoin stays extra-bank, then it has no authority to regulate it. However, she said, the Department of Treasury does have the authority to regulate it.
- larrik 13y agoSome people may think "Fed" means "US Government", but it's explicitly stated in the article that “The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way.” It's just jurisdiction, and the Federal Reserve Chairwoman says they don't have it. As for the rest of the government? Well, there's literally nothing they can't try to regulate.
- argumentum 13y ago> Well, there's literally nothing they can't try to regulate. You did say try, but according to the constitution they aren't allowed to regulate speech, religion or the press. (Congress "shall make no law .." abridging these rights).
- hayksaakian 13y agoThey have tried and succeeded to regulate those as well Congress can disregard the constitution all they want, and the president can approve all he wants. Only the Judicial branch can actually punish violations of the constitution.
- luckyno13 13y agoAnd since the major decision makers of the Judicial branch are Executive appointees....
- argumentum 13y agoThat's too simplistic an implication. Yes, they are appointed by the executive in power, but they have to be approved by congress and it is for life, which means that no single executive/legislature determines the entirety of the SCOTUS. (not saying the Court is always right, of course)
- logfromblammo 13y agoThey are also paid in dollars. If Bitcoin were an existential threat to the Federal Reserve banking system, I wouldn't expect them to rule in its favor. The dissenting opinion would probably be worth reading, but there's no way it wouldn't come down at least 5-4 in favor of their own paychecks.
- dragonwriter 13y ago> and it is for life "during good behavior", actually.
- jfeser 13y agoInterestingly, no justice has ever been removed for bad behavior.
- dragonwriter 13y ago> Interestingly, no justice has ever been removed for bad behavior. Plenty of lower court judges have been (and one Supreme Court Justice resigned in the face of impeachment, and so was certainly driven by office by the power of Congress to remove him, even if he wasn't, strictly speaking, removed.)
- MichaelGG 13y agoThey have regulated religion as well. Only certain religions can use, say, peyote in ceremonies. If tonight I get a vision that mandates I must use this chemical with my followers, I don't qualify. There are other exemptions too for religion, where they decide what a real religion is. I think, for instance, conscientious objectors needed to have an approved religion. (There should be no freedom of religion explicitly; it just opens things up for abuse and silly interpretations. Freedom of speech, thought, assembly and so on should be more than enough to include religion.)
- argumentum 13y agoI totally agree it has been misinterpreted, I'm pretty sure the intention of Jefferson and Madison was that the government is not supposed to be able to determine what constitutes a religion in addition the right to believe & practice it* . The inclusion of the word "religion" seems a practical response to the tendency of governments to ban practices that threatened their power. * Where the preamble declares, that coercion is a departure from the plan of the holy author of our religion, an amendment was proposed by inserting "Jesus Christ," so that it would read "A departure from the plan of Jesus Christ, the holy author of our religion;" the insertion was rejected by the great majority, in proof that they meant to comprehend, within the mantle of its protection, the Jew and the Gentile, the Christian and Mohammedan, the Hindoo and Infidel of every denomination. -Thomas Jefferson, Autobiography, in reference to the Virginia Act for Religious Freedom (from which the 1st amendment is derived)
- dllthomas 13y agoDoesn't "we can't interfere with a religious practice" plus "we can't determine what is a legitimate religious practice" mean anyone can claim anything to be a religious practice? "Oh, I'm sorry, I'm engaged in the blessed sacrament of the mugging."
- jerf 13y agoThis is where it's worth remembering that humans are in the justice system by design. While the line is intrinsically fuzzy, one can at least agree that at one extreme a marijuana user coming up for charges who suddenly claims he has a marijuana-based religion in an attempt to get out of it isn't going to get very far. Judges are not required to be as stupid as computers interpreting the law.
- logfromblammo 13y agoThe Constitution also says that the states cannot coin money, issue paper money, or make anything but gold and silver coin tender in payment of debts. (Article I, sect. 10, clause 1) Technically, they shouldn't be accepting Federal Reserve Notes as payment for any state taxes, including sales taxes. Note that this clause does not authorize the federal government to declare a legal tender or issue paper money; it simply prohibits the states from doing those things. Thanks to the 10th Amendment, those are reserved exclusively to the people. The wording is a bit tortured, but a logical parse is that powers not delegated to the federation are reserved to the states, and that powers prohibited to the states are reserved to the people. Legal tender, and paper money are not delegated to the federation, but prohibited to the states, therefore they remain the province of the people. There should be no problem with the Federal Reserve printing its own notes, but there's no way in hell that making them legal tender or accepting them for payment on state or federal debts is constitutional. They do it anyway. Hardly anyone cares. Those who do are ignored. As usual, they will do as they please, damn the consequences, and hang it all up under the interstate commerce clause. Edit: Article I, section 8, clause 5 does give the federation the power to coin money and standardize its value. It still doesn't give them the power to accept those coins as payment for debts unless they are gold or silver.
- dailyrorschach 13y agoI mean there’s likely no convincing you - but there’s plenty of scholarship to disagree. The Constitution quite clearly gives Congress the power to “coin Money and regulate the value thereof.” It of course makes no additional statement as to how that should be done. It’s a pretty tortuous reading in my opinion and one that would basically be invalid going back to McCulloch v. Maryland to say that coin Money, must only mean metallic alloy coins. Between Expressed Powers and Necessary and Proper there’s certainly enough justification - it relies even less on the Commerce clause.
- logfromblammo 13y agoUnfortunately, it doesn't matter one little bit if you can convince me or not, as I am neither a federal circuit court judge, appellate judge, or supreme court justice. I think it is less important that our money be a particular commodity than it is that the government lack the power to manipulate its value for its own convenience. In my opinion, it is clear that the power to "coin money and regulate the value thereof" is to standardize the exchange rates between coins, probably by weight of the metal, but not necessarily. It is also clear that the coins need not be metal, but also that no one could be forced to accept coins other than gold or silver coins. Thus, they could stamp out wooden nickels, but that wouldn't make them worth anything to anybody, except possibly for payment of federal taxes. As long as we have those, it is only a short hop to rectangular paper "coins". They can do it, but nobody has to accept them. But since nobody is trying to pay taxes with Bitcoin yet, and the federal government isn't mining them, as far as we know, there is no justification for them to be standardized or otherwise regulated whatsoever. It might arguably be authorized under whatever clause, but it certainly isn't justified.
- shachar 13y agoFed doesn't have authority to regulate jack. Fed is a private organization, set up by banks in the '30s to self-regulate themselves, presumably to stave off the government descending on this industry and regulating it to the ground. I still don't understand why they weren't disbanded in 2008.
- Cless 13y agoThe Fed was set up a couple of decades before the '30s.
- logfromblammo 13y ago1913, I believe. Jekyll Island. Look it up if it interests you.
- maxerickson 13y agohttp://en.wikipedia.org/wiki/Federal_Reserve_Act http://en.wikipedia.org/wiki/Federal_Reserve_Act Will you read it?
- dllthomas 13y agoStrictly speaking, if people start maintaining deposit accounts denominated in bitcoins, I wonder whether the Fed could set the reserve rate.
- larrik 13y agoI think if banks started doing it, the Fed could regulate the banks with respect to bitcoin. I don't believe it would magically apply to anyone else, though. Admittedly I don't follow finance, though.
- anigbrowl 13y agoAgreed. Additionally, Janet Yellen must have been feeling quite annoyed, since the lawmakers asking her about this probably know full well that the Fed has nothing to do with that sort of thing.
- Eliezer 13y agoThree cheers for not overreaching one's mandate. I know we rag a lot on Federal Reserve chairpeople for not doing NGDP level targeting, but in a lot of ways it's one of the most sensible branches of government.
- endersshadow 13y agoThe Fed isn't a branch of government. They also typically target 2% inflation, a la the ECB. The difference being that the Fed doesn't have a specific requirement to target it, whereas the ECB does. Edit: They do the targeting through a variety of ways--and none of them touch Bitcoin or in any way are influenced by Bitcoin. Just like the Fed has no authority nor mandate to regulate any other currency than the USD.
- lmg643 13y agoIn addition to not being a branch of government, it is also not clear that the Fed is at all "sensible". I don't doubt that the Fed is full of smart people, but they seem to use their smarts to find ways to put a band-aid on the mess the last Fed chair made by keeping interest rates too low, too long. Digital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. Gox certainly doesn't help change that impression.
- skylan_q 13y agoDigital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. Gox certainly doesn't help change that impression. They believe this to be the case. If they didn't, they wouldn't believe in the need for central banking. :)
- jmcqk6 13y agoDigital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. The primary function of the Fed is to be a stabilizing force in the market. There is absolutely no evidence that bitcoin will ever be a threat against this. Even the logical arguments in favor of that position have a hard time holding water.
- acjohnson55 13y agoIt's kind of funny, but on one hand, that statement is probably the best thing a libertarian reader could imagine hearing from Yellen. That's how I read it at first, and was thinking, "wow, that's pretty radical for the government to intentionally take itself out". Yet, upon second reading, I think the intention was probably more to cast Bitcoin as a wild-west, do-at-your-own-risk, good-luck-to-ya type of asset to work with. I think the message was meant more for banks and investors. The real subtext being, "if you lose your shirt, get defrauded, or there's large scale tampering, don't come crying to the Fed".
- mey 13y agoRegulation cuts both ways.
- redthrowaway 13y ago>the intention was probably more to cast Bitcoin as a wild-west, do-at-your-own-risk, good-luck-to-ya type of asset to work with. That's exactly what it is, and exactly what it should remain.
- jljljl 13y agoProponents of Bitcoin tend to view the lack of regulation as a feature, not a bug. With that lack of regulation comes higher risk of losing everything in the event of a catastrophe. It's hard to have it both ways.
- tsotha 13y agoBut there's no lack of regulatory power here. What Yellen was saying is the Fed can't regulate bitcoin. But the Treasury Department can do anything from nothing to an outright ban.
- zecho 13y agoGovernments don't regulate technologies, they regulate people. There are a million ways governments (who are also made up of people) can and will regulate bitcoin and the like. The persistent belief among some cryptocurrency proponents that they're invincible to the powers of government is really naive. Just because there isn't regulation now means jack squat. It's not a feature, it's a side effect of newness and reactionary politics.
- devindotcom 13y agoThe letter Manchin wrote was not to the Fed but to the secretary of the Treasury and a few other Treasury-related officials. They haven't responded, as far as I know. This is a separate (and very dumb) line he is pursuing. I consider myself fairly ignorant of government issues like this but even I could tell you the Fed would be the wrong institution to ask about regulating Bitcoin (already a foolish notion).
- tptacek 13y agoFair warning: she means the Federal Reserve doesn't have the authority to regulate Bitcoin. The Federal Reserve is not the nexus of financial regulation in the US Government, and Congress can delegate additional authority to the Fed any time it wants.
- abruzzi 13y agoYup, no mention of the Treasury Department, the Securities and Exchange Commission, and for that matter the US Congress. And it certainly seems the SEC would have some authority over entities that seek to act like banks or exchanges.