US Senate Mulls over Bitcoin

The US Senate has held its first ever hearing on the potential benefits and dangers of virtual currencies such as Bitcoin.

The hearing, before the homeland security and government affairs committee, was titled ‘Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies’. Silk Road, an online black market for drug trading, used Bitcoin for transactions and was closed down by the Federal Bureau of Investigations (FBI) last month. As Bitcoins can be traded anonymously, trades are difficult to track.

“The Department of Justice [DoJ] recognises 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 Senate Homeland Security and Government Affairs Committee.

“We have also seen, however, that certain aspects of virtual currencies appeal to criminals and present a host of new challenges to law enforcement,” he added.

The Federal Reserve’s chairman, Ben Bernanke, was absent from the hearing, but commented 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.”

Presenting the case for the virtual currency is Patrick Murck, general counsel for lobby group Bitcoin Foundation, and Jeremy Allaire, chief executive officer (CEO) of Circle Internet Financial, a company that aims to make Bitcoin usage more mainstream.

Murck argues that the currency does not “pose a unique or unsolvable challenge to law enforcement or existing regulatory structures.

“Bitcoin can facilitate private and anonymous transactions, which are resistant to oversight and control,” Murck said. “This by no means implies that using Bitcoin can or should provide anyone immunity from the law.

“There may be as many reasons to support Bitcoin as there are Bitcoin supporters. But we believe Bitcoin holds out a number of powerfully beneficial social and economic outcomes, including global financial inclusion, enhanced personal liberty and dignity, improved financial privacy, and a stable money supply for people in countries where monetary instability may threaten prosperity and even peace.”

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