Regulating the Bitcoin

Earlier this month a Texas judge ruled that Bitcoins are a currency and are therefore subject to government oversight.

In March the US Treasury issued a set of rules in an attempt to reign in the industry, ordering that Bitcoin business must register with the federal government and adhere to a regulatory regime as all other currencies do. 

Now a US senate committee is investigating the coin and deciding how much of a role the state can and should play.

This week USA Today reported that the Senate Homeland Security and Government Affairs Committee has been questioning government agencies on how they oversee virtual currencies. Responses are due at the end of August.

But the cyrptocurrency community isn’t breaking a sweat. Patrick Murck, Bitcoin Foundation’s general counsel, told USA Today that he found the State’s actions “proactive” and conducive to “productive dialog.”

Meanwhile, the New York Department of Financial Services issued a series of subpoenas in August to Bitcoin businesses. The banking and insurance department wanted to know how the industry was protecting against money laundering and providing customers with protection.

Murck said New York was “trying to set the policy for the entire country,” adding that it is unlikely the state has any jurisdiction in the matter.

Skeptics point to several issues including anonymity, lack of regulation and potential use in black markets. Transactions are difficult to trace and the virtual money is not tied to any sort of bank or business.

The Bitcoin Foundation, a trade organization for the digital currency, has taken the issue head on by attending a meet-and-greet with lawmakers this past week, The Verge reports. The meeting was meant to be educational as Bitcoin representatives explained the technical side of their business to the Fed, the IRS, the FBI and the Department of Homeland Security, among others.

Currently, the Bitcoin camp is split between those who invite regulation and those who oppose it. In a recent interview with CATO Institute, Jerry Brito, senior research fellow at the Mercatus Center, said that whether or not the community supports government overisight is not the issue.

“The US government has anti money laundering laws and anti terrorism financing laws and they’re going to apply these laws,” he said.

See Brito’s full interview here: