Bitcoin tops $42,000 as Yellen lauds 'historic' crypto overhaul

Yellen praised an upcoming order from Biden in a statement on Treasury's website that was later removed, saying it strikes the right balance between fostering innovation and addressing potential risks

Bitcoin jumped above $42,000 amid a sharp rally in digital tokens, spurred by optimism about a sweeping U.S. overhaul of crypto oversight that Treasury Secretary Janet Yellen called “historic.”

The largest cryptocurrency rose as much as 10% to $42,427, its highest level since March 2. Ether climbed 8% while so-called privacy coins like Monero posted large gains. The crypto advance came as a broad risk-on rally embraced European stocks.

Yellen praised an upcoming executive order from President Joe Biden in a statement on the Treasury’s website that was later removed, saying it strikes the right balance between fostering innovation and addressing potential risks. That boosted sentiment in an industry that has long called for greater regulatory direction.

“For years, the crypto market has been hindered by a lack of regulatory clarity in the U.S.,” said Hayden Hughes, chief executive officer of trading social-media platform Alpha Impact, in a message Wednesday. “If clear guidelines are passed, this could be a watershed moment for the industry.”

Yellen said the department’s efforts under the executive order would complement work that’s already been done, including the report the President’s Working Group on Financial Markets put out last year on stablecoins.

In the since-removed statement dated March 9, Yellen said the approach outlined in the order “will support responsible innovation that could result in substantial benefits for the nation, consumers, and businesses.”

Even after Wednesday’s rally, Bitcoin remains within the range of $33,000 to $48,000 where it’s traded most of this year. After diverging from stocks early last week, cryptocurrencies gave up most of those gains as the war in Ukraine escalated, pouring cold water on the argument that they’re a safe haven in times of geopolitical turmoil.

Privacy Upside

Privacy coins -- so called for the higher degree of anonymity they afford users -- were some of the biggest winners over the past 24 hours, with Monero jumping 21% and Zcash up 17%, based on CoinGecko data. The gains were driven by speculation that they may get payment traffic displaced by the sanctions on Russia.

“The recent surge in privacy coins is mostly driven by traders speculating on the possibility that we will see capital flight” into them, said Ben Caselin, head of research and strategy at crypto exchange AAX, in a message Wednesday.

While privacy coins allow for a higher degree of anonymity, the networks they live on are less decentralized and less secure than Bitcoin, and limited in market cap, he said. “Rather than a new trend, current uptake is likely to be limited, with more volatility ahead.”