FORTUNE -- Bitcoin enthusiasts have had a rough week. The collapse of the world's largest bitcoin exchange, Mt. Gox, shook investors faith in the currency, sending the price of bitcoin to a low of $418.78 on Feb. 25 from a high of $1,151 just a few months before.
The currency has since recovered some of that lost value, but the incident has left many wondering about the future of the world's most famous cryptocurrency. One thing is for sure, though: the biggest threat to bitcoin isn't from the failure of private bitcoin-related institutions but the chance that public regulators like the Federal Reserve will crack down hard with stifling regulations.
MORE: How Mt.Gox went down
That's why bitcoin boosters should have let out a sigh of relief when Fed Chair Janet Yellen said in no uncertain terms that her institution will not be regulating the currency anytime soon. "It's important to understand that this is a payment innovation that's happening outside the banking industry," Yellen said at a Senate Banking Committee hearing Thursday morning. "The Federal Reserve simply does not have the authority to regulate bitcoin in any way."
The answer came in response to West Virginia Senator Joe Manchin's questions about bitcoin, which belied intense distrust of the currency. Manchin called bitcoin an "unstable currency" that he believes is being used mostly for illegal activities. Manchin was seemingly disappointed with Yellen's statement that the Fed had no authority to regulate bitcoin, saying he believed there would be an intersection between bitcoin and Fed-regulated banks in the near future.
Yellen didn't budge, telling Manchin that if he wanted further oversight of the currency, Congress could take action to require it. Otherwise, she said, any regulation would be under the purview of the Justice Department and the Treasury Department.
The new Fed Chair was stumped on a key Volcker Rule question.
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One particular exchange bothered Jim Bianco of Bianco Research, who wrote in a note to clients that it appeared Yellen was "painfully flustered" when North Carolina Congressman Patrick McHenry questioned the Fed MOREChristopher Matthews - Feb 13, 2014 5:00 AM ET
Brown-Vitter and other efforts to boost bank capital are misguided. Capital cushions provide a false sense of security.
By Cyrus Sanati
FORTUNE -- Recent efforts to raise bank capital requirements are off the mark. Forcing the big banks to hold on to a greater share of their assets as a way to boost the safety of the nation's financial sector may seem like a no-brainer, but it ignores how vulnerable the MOREMay 6, 2013 9:54 AM ET
Consultant calls recently proposed banking regulations "weapons of mass destruction."
FORTUNE -- Call it too big to succeed.
A report about the global banking industry by Boston Consulting Group, which was released on Tuesday, says new regulations and less business will force the big banks to dramatically shrink. Of the 28 global banks the consulting firm looked at, only a few of the leading players like -- Goldman Sachs (GS), Deutsche Bank MOREStephen Gandel, senior editor - Apr 30, 2013 2:13 PM ET
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