Federal Reserve Chairwoman Janet Yellen told the Senate Banking Committee the Fed does not have any authority to oversee the digital currency called the bitcoin, The Wall Street Journal blog MoneyBeat reported.

Yellen made her remarks in her testimony before the committee on Thursday, February 27, 2014. She said, "The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way." She called the digital currency a "payment innovation that is taking place entirely outside the banking industry" and that she finds no meeting point between bitcoin and banks that the central bank can supervise, the report said.

Yellen gave her testimony just a few days after Mt. Gox, a bitcoin trading platform, closed its website, dealing the most serious blow so far to the virtual currency in its five years of existence. The closure also highlighted the risks that come with the digital currency whose value has skyrocketed multiple times last year, the report said.

Because there is no insurance for bitcoins deposited in any exchange, individuals who left their money in Mt. Gox may find it difficult to get them back. According to CoinDesk price index, Bitcoin prices have declined 1% to $571.29 recently. In the early part of December last year, Bitcoin was trading at the $1,100 mark and at the vicinity of $700 at the start of the year, the report said.

Yellen testified that Congress should work on the issue. She said, "It certainly would be appropriate, I think, for Congress to ask questions about what the right legal structure would be for virtual currencies that involve nontraditional players." However, she said that even this would be for difficult as no central issuer or network operator of the digital currency to regulate.

Analysts on Wall Street are now also more wary about the cryptocurrency. Steven Englander, the Currency Strategist of Citigroup, told clients in a note that after the closure of Mt. Gox, Bitcoin has become "even more speculative," the report said.