http://online.wsj.com/news/articles/SB10001424052702304439804579205740125297358
WASHINGTON—Senior U.S. law-enforcement and regulatory officials said they see benefits in digital forms of money and are making progress in tackling its risks. The price of bitcoin, the most common virtual currency, soared to a record following the comments.
U.S. authorities, appearing Monday at the first-ever congressional hearing on virtual currencies, outlined the pitfalls and promises of bitcoin amid concern the anonymity and decentralized nature of some virtual currencies can help facilitate crimes. The hearing provided a financial lift to bitcoin as U.S. officials, who have previously highlighted the currency's role in money laundering and other illicit activities, called it a "legitimate" financial service.
"The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce," Mythili Raman, acting assistant attorney general for the department's criminal division, said in testimony before the SenateHomeland Security and Government Affairs Committee.
Federal Reserve Chairman Ben Bernanke, who didn't attend the hearing, said in a letter to senators that virtual currencies "may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system."
The price of bitcoin soared early Monday after the officials' statements were widely reported. On one exchange, Tokyo-based Mt. Gox, it reached a high of $675. Bitcoin traded at about $13 in January.
The congressional hearing is the first of two being held this week, with the Senate Banking Committee expected to hear from a senior Treasury Department official and a Massachusetts banking regulator on Tuesday. Despite interest in bitcoin, Monday's hearing was attended by only one member of the Senate panel, Sen. Tom Carper (D., Del.), who chairs the committee. Other senators were still en route to Washington after spending the weekend in their home states.
Sen. Carper didn't outline any legislative proposals for digital money and said he was focused on gathering information. "Virtual currencies, perhaps most notably bitcoin, have captured the imagination of some, struck fear among others and confused the heck out of the rest of us, including me," Sen. Carper said.
Bitcoin is a 4-year-old virtual currency that isn't backed by a central bank and can be traded on a number of exchanges or swapped privately. Its price has vaulted to records in recent weeks, fueled by investor views that the virtual currency can have a credible future as an alternative to traditional methods of payment. A number of merchants are accepting bitcoin as payment because the transaction costs associated with the currency are generally lower than those with credit or debit cards.
The skyrocketing prices of bitcoin, along with the use of the currency by both online and brick-and-mortar retailers, have caught Washington's attention. Regulators have warned money-transfer businesses they must follow the same rules as established financial institutions, including complying with anti-money-laundering laws. Authorities have begun meeting with other government agencies to follow new developments, including one led by the Federal Bureau of Investigation that is tracking emerging threats related to the technology. Last month, authorities took down Silk Road, an online marketplace for illicit goods that used bitcoin as a form of payment.
At Thursday's hearing, officials from the U.S. Secret Service, which investigates counterfeit currencies, and the Treasury Department's Financial Crimes Enforcement Network detailed successful investigations into criminals using bitcoin or other currencies. They said regulators need to ensure that companies that deal in bitcoin comply with existing regulations on money laundering and other matters.
Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network, said virtual currency transactions are still relatively small in value compared with global criminal proceeds. She said she didn't believe the virtual currencies had exposed significant gaps in current law. "We feel like we have a pretty good basis to act," she said.
Sen. Carper said he is "encouraged that maybe it's possible to have the benefits of virtual currencies and to actually be able to not facilitate" criminal activity. However, he also expressed concern that virtual currencies are being used for crimes, including "selling weapons, child pornography and even murder-for-hire services."
