Senate recognizes legitimate benefits of Bitcoin

Both the DOJ and the SEC have told a US Senate committee hearing that Bitcoin represents a legitimate financial instrument, delighting investors and speculators at the idea of wider acceptance from the mainstream.

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Senate recognizes legitimate benefits of Bitcoin

Both the DOJ and the SEC have told a US Senate committee hearing that Bitcoin represents a legitimate financial instrument, delighting investors and speculators at the idea of wider acceptance from the mainstream.

Their comments came ahead of a hearing called by the US Senate Committee on Homeland Security and Governmental Affairs to look into the potential of digital currencies, and the risks they may pose.

This just a month after the FBI shut down the Silk Road, an unregulated online marketplace that become the go-to website for anyone seeking mail-order drugs. Silk Road payments were made in Bitcoin, and it’s stories like these that have given digital currencies a bad name for some.

Principal Deputy Assistant Attorney General Peter Kadzik wrote that digital currencies behave like other financial services, which are also used by criminals and “malicious actors.” The difference is Bitcoin is decentralized, transnational and much harder to regulate.

Mary Jo White, chairwoman of the SEC, suggested Bitcoin would be considered securities by their definition and thus subject to SEC regulation.

What has many officials spooked is the fact that the currencies are designed to be untraceable, allowing anonymous transactions on the web. Privacy advocates see that as a positive, but law enforcement officials want to know what everyone’s hiding here.

Federal Reserve Chairman Ben Bernanke said the Fed was not planning to attempt to regulate Bitcoin. Bernanke said the Fed lacks the “authority to directly supervise or regulate these innovations or the entities that provide them to market,” he wrote to the committee.

Bitcoin researcher Jerry Brito sees these hearings as a sign that Bitcoin “is coming into its own,” and is starting to gain traction across much of society.

This would be a boon to the currency, which has seen its value driven up in some part when investors believe acceptance and legitimacy move forward. A large faction of Bitcoin users seek cooperation with regulators so Bitcoin businesses can grow and proliferate without any clampdowns from governments.

To this point in the US, Washington’s stance has been unclear, and this has cooled innovation, moving developments and exchanges offshore. China currently sees 35% of all Bitcoin transaction activity and is home to the world’s largest Bitcoin exchange, BTC China.

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