American authorities listed the “pitfalls and promises” of bitcoin amid concern the anonymity and decentralized nature of some virtual currencies during the first hearing on virtual form of money.
The meeting of officials and lawmakers provided a financial lift to bitcoin as those who stand against this form of money and who have previously spoken of its negative impact on 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 before the SenateHomeland Security and Government Affairs Committee.
Federal Reserve Chairman Ben Bernanke, who wasn’t present at the hearing, said in a letter to senators claiming 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,” informs The Wall Street Journal.
The total market capitalization of the bitcoin economy is now estimated at more than $8 billion basing on recent prices, says Bitcoincharts.com.
During the first-ever hearing Sen. Carper didn’t outline any legislative proposals for the market of digital forms of 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.
The skyrocketing prices of digital money, as well as wide spreading popularitu of the currency by both online and brick-and-mortar retailers, have caught Washington’s attention.
Some state agencies have even issued a warning for money-transfer businesses explaining that they are obliged to 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,” The Wall Street Journal writes.
“Last month, authorities disclosed they took down Silk Road, an online marketplace for illicit goods that used bitcoin as a form of payment,” the publication reveals.
Ms. Raman explained to her colleagues 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 the hearing, numerous officials and representatives from the U.S. Secret Service, which is responsible for investigation of 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, told those who were present at the meeting that virtual currency transactions are still relatively small when compared to global criminal proceeds.
She went on, adding 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.