US Treasury Secretary Janet Yellen needs the commercial banks to keep buying trillions of dollars of Treasury securities a year, and the banks need a steeper yield curve to make money buying Treasuries. Photo: AFP

Raising hackles in the crypto community, US treasury secretary nominee Janet Yellen expressed concern Tuesday about digital assets being used to fund “illicit” activities.

Her comments, echoing European Central Bank chief Christine Lagarde’s recent statement about bitcoin-related “funny businesss,” come at a time when many investors are worried about the potential impact of stepped-up regulatory scrutiny of the digital currency sector.

“I think many [cryptocurrencies] are used, at least in transactions sense, 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 doesn’t occur through those channels,” the former chair of the US Federal Reserve said during her confirmation hearing, responding to a question from Democratic Senator Maggie Hassan.

“We need to make sure that our methods for dealing with these matters, with tech terrorist financing, change along with changing technology, cryptocurrencies are a particular concern.”

Yellen’s comments were predictably met with derision on Twitter.

Some pointed out that the involvement of banks in money laundering and financing terrorism vastly exceeds the role of cryptocurrency and that the US dollar is still the chief medium of exchange in criminal activity.

Referring to Lagarde and Yellen, respectively, bitcoin guru Max Keiser tweeted, “Snakeface’s less intelligent American cousin spews verbal diarrhea while ignoring $300,000,000 in fines paid by [US] banks for laundering drug money and funding terrorists.”

The Wolf Of All Streets tweeted, “No asset has been used for terrorist funding and laundering more than the United States Dollar. This narrative is as tired as Janet Yellen after a 4 day rave.”

Others were more positive, dismissing Yellen’s comments as inconsequential FUD and stressing that her enthusiasm for money printing could be the fuel that sends bitcoin and other cryptos to the stratosphere.

Rob “Crypto Bobby” Paone tweeted, “Not sure why folks are worried about Janet Yellen’s comments on cryptocurrency. She’s going to provide so much stimmy you’re going to have BTC gains oozing out your ears”

Watchdog pick teaches blockchain

It is unclear exactly what approach the incoming Biden administration will take to crypto, but the US president-elect on Monday named an academic who teaches a class on blockchain technology as his pick for chairman of the Securities and Exchange Commission.

When Gary Gensler was an official in the Obama administration, he implemented reforms to clean up the derivatives market following the 2008 financial crisis. The former investment banker has a reputation for being a tough regulator and is expected to make investor protection a top priority.