Senators attending this week’s hearing entitled “Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies” being held by the Senate Homeland Security and Governmental Affairs Committee likely could have predicted what they were going to hear. The Securities and Exchange Commission (SEC) made the case that the increasingly popular cryptocurrency, the Bitcoin, was actually a security and should be regulated; the Department of Homeland Security (DHS) had already adopted an “aggressive posture” to address the “emerging threat and criminal exploitation of virtual currency systems”; and the Treasury Department had recently produced two rules on how exchanges should handle the Bitcoin.
Two government agencies missing at the hearing were the Internal Revenue Service (IRS) and the Commodity Futures Trading Commission (CFTC). The IRS apparently can’t figure out how to tax private transactions between people who may reside in different countries doing business in the ether, while the CFTC is still trying to determine if the Bitcoin is a commodity to regulate.
The Department of Justice (DOJ) warned about how the Bitcoin enables money laundering, illicit tax shelters, and anonymous purchasers of illegal drugs, child pornography, and stolen credit card information. Said Mythili Raman, a DOJ assistant attorney general, the growth in the use of the Bitcoin “inevitably will be accompanied by an increase in illicit transactions, which makes it critical that virtual currency [exchanges] understand their legal obligations and requirements.”
Other supporters of regulating the Bitcoin were also heard, including Jeremy Allaire, founder and CEO of Circle Internet Financial, whose company would benefit in its quest to make Bitcoin transactions easier and consequently more popular if the budding industry were only more closely regulated. Said Allaire:
Criminals and terrorists will seek to employ digital currency if it remains unregulated, leaving Bitcoin operators to operate without stringent controls and effective systems to verify identities, monitor transactions and report suspicious activity.
Allaire’s company would be only too happy to provide to the various regulatory agencies salivating over the Bitcoin opportunity all of that information, for a small fee of course.
The senators also heard from Patrick Murck of the Bitcoin Foundation. Murck pointed out the potentially enormous benefits such a digital currency could bestow on customers and clients worldwide:
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