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Author Topic: U.S. Agencies Tell Senate Bitcoins Offer Legitimate Benefits  (Read 782 times)
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November 18, 2013, 02:15:47 PM
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U.S. Agencies Tell Senate Bitcoins Offer Legitimate Benefits
2013-11-18 05:01:00.13 GMT


By Max Raskin
     Nov. 18 (Bloomberg) -- The Department of Justice and
Securities and Exchange Commission are telling a U.S. Senate
committee that Bitcoins are legitimate financial instruments,
boosting prospects for wider acceptance of the virtual currency.
     Representatives from the agencies told the U.S. Senate
Committee on Homeland Security and Governmental Affairs ahead of
a hearing today that the digital money offers benefits and
carries risks, like any other online-payment system, according
to letters they released before the meeting.
     The committee scheduled the hearing “to explore potential
promises and risks related to virtual currency for the federal
government and society at large” after the Silk Road Hidden
Website was shut down in October. The closing of the
marketplace, where people could obtain drugs, guns and other
illicit goods using Bitcoins, is helping fuel a rally in the
virtual currency as speculators bet that the digital money will
gain more mainstream acceptance.
     “The FBI’s approach to virtual currencies is guided by a
recognition that online payment systems, both centralized and
decentralized, offer legitimate financial services,” Peter
Kadzik, principal deputy assistant attorney general, wrote in a
letter yesterday. “Like any financial service, virtual currency
system of either type can be exploited by malicious actors, but
centralized and decentralized online payment systems can vary
significantly in the types and degrees of illicit financial risk
they pose.”

                          Virtual Money

     Introduced in 2008 by a programmer or group of programmers
going under the name of Satoshi Nakamoto, Bitcoin is being used
to pay for everything from gourmet coffee to smartphones on the
Internet. There are almost 12 million Bitcoins in circulation,
according to Bitcoincharts, a website that tracks activity
across various exchanges.
     Bitcoins were trading for $460 apiece yesterday on
Bitstamp, one of the more active online exchanges, where the
digital money is traded for dollars, euros and other currencies.
The virtual currency reached a record of $473 yesterday, and is
up more than 30-fold so far this year.
     “Two years ago it was alarm when Silk Road first came on
the scene,” said Jerry Brito, senior research fellow at the
Mercatus Center at George Mason University who is also
testifying in front of the committee today. “Since then,
Congress has been educating itself and understands that there
are great potential benefits, and like any new technology there
are going to be some challenges. But they see there is a balance
to be struck here and they are generally positive on the
technology.”

                       Gaining Acceptance

     Since the virtual currency exists as software that’s
designed to be untraceable, it’s an attractive tender for those
seeking to transact anonymously via the Web. While the closing
of Silk Road initially caused the digital money to lose a third
of its value within days, Bitcoins have recovered and rallied to
record levels as speculators and investors bet that the currency
will be less of a fad and gain more mainstream acceptance.
     Ben Bernanke, chairman of the Federal Reserve, is also
weighing in on the hearing, saying that it has no plans to
regulate the currency.
     “Although the Federal Reserve generally monitors
developments in virtual currencies and other payments system
innovations, it does not necessarily have authority to directly
supervise or regulate these innovations or the entities that
provide them to the market,” Bernanke wrote in a letter to the
committee.
     The hearings will bolster the view that Bitcoins are an
acceptable alternate means of conducting transactions, and that
their use will grow, said Brito.
     “These hearings means Bitcoin is finally coming into its
own; it’s a real thing and it’s not going anywhere and these
hearings highlight that,” he said.

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--Editors: Reed Stevenson, Kevin Miller

To contact the reporter on this story:
Max Raskin in New York at +1-212-617-0443 or
mraskin5@bloomberg.net

To contact the editor responsible for this story:
Pui-Wing Tam at +1-415-617-7327 or
ptam13@bloomberg.net
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