On Monday afternoon, the Senate Homeland Security and Governmental Affairs Committee will hold its first hearing on how to regulate virtual currencies. The hearing is called “Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies.”
It is a first step in what will likely be a long road toward any regulatory law, according to a story in Time.
The hearing follows other attempts by U.S. regulators to analyze the popular cryptocurrency Bitcoin. The SEC reviewed whether Bitcoin should be regulated like a security. The U.S. Treasury Department’s Financial Crimes Enforcement Network has produced two rules defining how exchanges should handle bitcoin and other virtual currencies. The Treasury declined to define bitcoin as a currency, while a federal judge ruled that it does qualify as a currency.
The agency that will be responsible for regulating Bitcoin will remain undecided until Washington can decide on a definition for the cryptocurrency. Is it a security? A currency? Or perhaps a commodity?
Seven experts are slated to testify at the hearing, which begins at 3 p.m. EST and is being held in the Dirksen Senate Office Building. The first three are with federal law enforcement agencies and are expected to cover Bitcoin’s potential to further the interests of criminals.
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The second panel of witnesses includes Patrick Murck, general counsel for the Bitcoin Foundation Inc. On Monday morning, Bitcoin hit its highest value ever, pushing above $600.
In his prepared testimony, Jeremy Allaire, chairman and CEO of Circle Internet Financial, says Bitcoin “represents one of the most important technical and economic innovations of our time” and that it helped to advance the ease of electronic payments and money transfers while lowering costs for businesses worldwide.
Allaire also listed decreasing the risk of fraud, increasing consumer privacy, and expanding the market for consumer financial products as benefits of widespread Bitcoin adoption.
Allaire also cited the global financial crisis of 2008 for advancing the popularity of digital currencies like Bitcoin.
“Finally, it seems clear to me that the global financial crisis shattered the trust of many consumers and businesses around the world,” Allaire said.
Ernie Allen, president and CEO of the International Centre for Missing & Exploited Children, cited the potential for digital currency like Bitcoin to help the 2.5 billion adults without access to mainstream financial products. But his testimony primarily focused on Bitcoin’s role in furthering the goals of sex traffickers and child pornographers.
Allen listed three reasons for Bitcoin’s resilience: anonymity, lack of central-bank oversight, and the paucity of laws monitoring digital currency exchanges.
Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network, discussed the potential for digital currencies to be used to launder money. She also illustrated the difference between centralized virtual currency like the Costa Rica-based Liberty Reserve and decentralized currency like Bitcoin.