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2013-11-19 02:11:54
WASHINGTON Senior U.S. law-enforcement and regulatory officials said they see
benefits in digital forms of money and are making progress in tackling its
risks. The price of bitcoin, the most common virtual currency, soared to a
record following the comments.
U.S. authorities, appearing Monday at the first-ever congressional hearing on
virtual currencies, outlined the pitfalls and promises of bitcoin amid concern
the anonymity and decentralized nature of some virtual currencies can help
facilitate crimes. The hearing provided a financial lift to bitcoin as U.S.
officials, who have previously highlighted the currency's role in money
laundering and other illicit activities, called it a "legitimate" financial
service.
"The Department of Justice recognizes that many virtual currency systems offer
legitimate financial services and have the potential to promote more efficient
global commerce," Mythili Raman, acting assistant attorney general for the
department's criminal division, said in testimony before the SenateHomeland
Security and Government Affairs Committee.
Federal Reserve Chairman Ben Bernanke, who didn't attend the hearing, said in a
letter to senators that virtual currencies "may hold long-term promise,
particularly if the innovations promote a faster, more secure, and more
efficient payment system."
The price of bitcoin soared early Monday after the officials' statements were
widely reported. On one exchange, Tokyo-based Mt. Gox, the price topped $700.
Bitcoin traded at about $13 in January.
The total market capitalization of the bitcoin economy now exceeds $8 billion
based on recent prices, according to the website Bitcoincharts.com.
The congressional hearing is the first of two being held this week, with the
Senate Banking Committee expected to hear from a senior Treasury Department
official and a Massachusetts banking regulator on Tuesday. Despite interest in
bitcoin, Monday's hearing was attended by only one member of the Senate panel,
Sen. Tom Carper (D., Del.), who chairs the committee. Other senators were still
en route to Washington after spending the weekend in their home states.
Sen. Carper didn't outline any legislative proposals for digital money and said
he was focused on gathering information. "Virtual currencies, perhaps most
notably bitcoin, have captured the imagination of some, struck fear among
others and confused the heck out of the rest of us, including me," Sen. Carper
said.
Bitcoin is a 4-year-old virtual currency that isn't backed by a central bank
and can be traded on a number of exchanges or swapped privately. Its price has
vaulted to records in recent weeks, fueled by investor views that the virtual
currency can have a credible future as an alternative to traditional methods of
payment. A number of merchants are accepting bitcoin as payment because the
transaction costs associated with the currency are generally lower than those
with credit or debit cards.
The skyrocketing prices of bitcoin, along with the use of the currency by both
online and brick-and-mortar retailers, have caught Washington's attention.
Regulators have warned money-transfer businesses they must follow the same
rules as established financial institutions, including complying with
anti-money-laundering laws. Authorities have begun meeting with other
government agencies to follow new developments, including one led by the
Federal Bureau of Investigation that is tracking emerging threats related to
the technology. Last month, authorities disclosed they took down Silk Road, an
online marketplace for illicit goods that used bitcoin as a form of payment.
Ms. Raman said that while the anonymity of virtual currencies appeals to
criminals and poses a challenge for law enforcement, U.S. authorities have
"been able to keep pace with that, and we've been able to develop protocols and
strategies to address it."
At Monday's hearing, officials from the U.S. Secret Service, which investigates
counterfeit currencies, and the Treasury Department's Financial Crimes
Enforcement Network detailed successful investigations into criminals using
bitcoin or other currencies.
Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network,
said virtual currency transactions are still relatively small in value compared
with global criminal proceeds.
She said she didn't believe the virtual currencies had exposed significant gaps
in current law. "We feel like we have a pretty good basis to act," she said.
Ms. Shasky will attend Tuesday's Senate Banking Committee hearing.
Sen. Carper said he is "encouraged that maybe it's possible to have the
benefits of virtual currencies and to actually be able to not facilitate"
criminal activity.
However, he also expressed concern that virtual currencies are being used for
crimes, including "selling weapons, child pornography and even murder-for-hire
services."
Corrections & Amplifications
An earlier version of this article incorrectly said the hearing took place
Thursday. It took place Monday.
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