Danny Bradbury at CoinDesk reports an ominous tone from Washington.

“Don’t bother running from regulation … because in the long term there’s nowhere to hide,” he writes.

Bradbury was covering the Senate Homeland Security and Government Affairs committee hearing on Bitcoin and other digital currencies.

Full video of the hearing is available at:

www.hsgac.senate.gov/hearings/beyond-silk-road-potential-risks-threats-and-promises-of-virtual-currencies.

Bradbury reports that FinCEN Director Jennier Shasky Calvery warned companies taking their business offshore would only lead to short-term gains. The idea is that Bitcoin businesses trying to get out from under US regulation are only hurting themselves in the long run.

That sounds like a lot of bluster, though, when you consider how well Bitcoin businesses are doing in China, as an example.

“Every country has an interest in protecting its financial system from illicit actors,” she said, calling out money launderers, terrorism financiers and fraudsters.

Collecting taxes and keeping the economy stable is part of the government’s job, she said. And regulation “both at home and abroad” is going to catch up because it must.

Jerry Brito, a researcher from George Mason University, another witness at the hearing, criticized Calvery’s remarks.

The real problem, he said, is not criminals but law-abiding businesses, innovators and entrepreneurs who feel stifled by the US’s regulatory environment.

Brito has argued in the Guardian newspaper that such a stifling environment is already in place, though this is not necessarily intentional.

Simply not knowing what state and federal compliance regulations apply to a business have had a chilling effect on development. Just ask Jaron Lukasiewicz, whose legitimate, malicious intent-free New York-based startup, Coinsetter, has had to all but bend over backward to stay on the good side of the law.

Calvery suggested Bitcoin businesses in the US do three things immediately: register with FinCEN, adopt strong AML practices, and maintain records and report to FinCEN — especially report suspicious activity.

Calvery said businesses based around fiat currencies have all found ways to do this, so digital currencies should be able to do the same.

The FBI and other agencies are on record as saying Bitcoin is a “legitimate” currency. Calvery’s tie-in with fiat currencies there makes you wonder exactly how Washington will try to define “legitimate.”

US officials might not yet totally get it — they might not yet grasp Bitcoin’s protocols or its value as a platform.

CoinDesk commenters spotted this quickly. Said user Rod: “Bottom line, their paradigm is collapsing but they can’t even see it.”