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YELLEN: Bitcoin is a highly speculative asset

Myles Udland
Markets Reporter

It happened — Federal Reserve Chair Janet Yellen talked about bitcoin (BTC-USD).

During a press conference following the Fed’s latest monetary policy decision, Yellen was asked about recent gains in the stock market and bitcoin and whether the central bank has factored in these rises in its assessment of the economy.

“I would simply say that bitcoin at this time plays a very small role in the payments system,” Yellen said. “[Bitcoin] is not a stable store of value, it doesn’t constitute legal tender, and it is a highly speculative asset.”

Yellen added in response to a later question that she sees the risks to financial stability from a change in the price of bitcoin as “limited.”

In terms of the Fed’s role in regulating the use of bitcoin, Yellen said only that the Fed expects the banks it does supervise would comply with any anti-money laundering rules that any digital currency transactions could touch.

On the stock market, Yellen said that Fed has noted that valuations in the stock market, compared to historical levels, are elevated but that, “economists aren’t great at knowing what appropriate [stock market] valuations are, and the fact that valuations are high doesn’t mean they are necessarily overvalued.”

Yellen added that a downturn in the stock market likely wouldn’t lead to significant changes in financial conditions, and that among other measures of financial stability “there’s nothing flashing red, or even orange.”

On Wednesday, the Fed raised interest rates by 0.25% to a range of 1.25%-1.5%. This is the third rate hike this year and the fifth during Yellen’s tenure. Yellen will be replaced by current Fed governor Jerome Powell in February 2018.

Following this announcement, stocks in the U.S. were higher with the Dow up triple-digits, where it was before the announcement, while bond yields were lower, gold was higher, and the dollar was sliding.

Bitcoin was trading near $16,400; at Yellen’s last press conference in September, bitcoin was trading near $3,700.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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