"To the best of my 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," Yellen said. "So the Federal Reserve simply does not have authority to supervise or regulate Bitcoin in any way."
The last week has been one of the most tumultuous in Bitcoin's brief history with the seeming disappearance of one of the major Bitcoin exchanges, Mt. Gox, which acknowledged a major theft that it described as a "tragic violation of the trust of users of Mt. Gox."
On Wednesday, Sen. Joe Machin (D-W.Va.) called on the US government to issue an outright Bitcoin ban, characterizing the virtual currency as encouraging "illicit activity" as well as being "highly unstable and disruptive to our economy."
Separately, the Manhattan District Attorney's office reportedly sent subpoenas to Mt. Gox and other Bitcoin exchanges and businesses that deal in the virtual currency. The investigation is said to be focused on the recent distributed denial-of-service attacks that forced Mt. Gox and other exchanges to suspend withdrawals.
But while keeping out of the political scrum over Bitcoin, Yellen noted that "it certainly would be appropriate I think for Congress to ask questions to what the right legal structure would be."
Yellen didn't offer an policy prescriptions, however, adding that "it's not so easy to regulate Bitcoin because there is no central issuer or network operator to regulate."