Wednesday, August 14, 2013

Breaking: Senate Committee Now Investigating Bitcoin

From NYT:
The Senate’s committee on homeland security sent a letter this week to the major financial regulators and law enforcement agencies asking about the “threats and risks related to virtual currency.” These currencies, whose popularity has grown in recent years, are often used in online transactions that are not monitored by traditional financial institutions.

“This is something that is clearly not going away, and it demands a whole government response,” said a person involved in the Senate committee’s investigation, who spoke on the condition of anonymity because the inquiry is continuing.

The Senate letter went out the same day that New York’s top financial regulator, Benjamin M. Lawsky, sent subpoenas to 22 companies that have had some involvement with bitcoin, according to a person briefed on the investigation.

Previously, there have been isolated efforts to crack down on those who took advantage of virtual currencies. But the two investigations made public this week appear to be the most wide-ranging government efforts to exert more coordinated control over what has been a largely faceless and borderless phenomenon.[...]

The committee recently stepped up its efforts because staff members had heard “real concern” from law enforcement officials, and because it became clear that regulators did not have enough information about the technology, according to the person involved in the investigation.

“The federal government must make sure that potential threats and risks are dealt with swiftly,” the Senate letter said.

Both the Senate committee and Mr. Lawsky have emphasized that the technology could have good uses, and any new regulations would help protect those.

But Mr. Lawsky, in a formal notice released on Monday, said, “If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.”

Mr. Lawsky’s office sent subpoenas to most of the companies that have publicly discussed investing in bitcoin or creating software that would allow for the transfer and exchange of bitcoins.

“It is in the common interest of both the public and the virtual currency industry to bring virtual currencies out of the darkness and into the light of day through enhanced transparency,” Mr. Lawsky’s notice said.

This is not good  for Bitcoin. It is not clear if NY state investigators or Senate committee staffers fully understand Bitcoin. However, it is within their power to smash Bitcoin into the dark underground, given that it has not yet gained broad adoption.

1 comment:

  1. This will be interesting. The state has rarely been successful at preventing a flourishing black market in any commodity. Very likely a source of the usual "unintended consequences", which in this case may make bitcoin ultimately stronger in the long term.