Ban Bitcoin? Maybe, Says One Senator

Bitcoin skeptic Joe Manchin says that the digital currency’s latest woes are evidence that the U.S. government needs to step in.

National Journal
Catherine Hollander
Catherine Hollander
Feb. 26, 2014, 12:24 p.m.

The fall of Mt. Gox, one of the best-known bit­coin ex­changes, has pro­duced in­tense spec­u­la­tion over the fu­ture of the vir­tu­al cur­rency. One sen­at­or has an idea for what should be next for the de­cent­ral­ized cur­rency: Shut it down in the United States — or at least sub­ject it to strict reg­u­la­tion.

“This vir­tu­al cur­rency is cur­rently un­reg­u­lated and has al­lowed users to par­ti­cip­ate in il­li­cit activ­ity, while also be­ing highly un­stable and dis­rupt­ive to our eco­nomy,” Sen. Joe Manchin said in a let­ter to bank­ing reg­u­lat­ors Wed­nes­day. “I urge reg­u­lat­ors to take ap­pro­pri­ate ac­tion to lim­it the abil­it­ies of this highly un­stable cur­rency.”

Bit­coin isn’t totally without over­sight, though, and it’s ex­pec­ted to face more reg­u­la­tion soon.

The Treas­ury De­part­ment’s Fin­an­cial Crimes En­force­ment Net­work is­sued guid­ance last year to cla­ri­fy when bit­coin users need to re­gister as money trans­mit­ters. Fin­CEN fol­lowed up with fur­ther guid­ance in Janu­ary for so-called miners of the cur­rency as well as in­vestors. State reg­u­lat­ors are also weigh­ing how to treat firms with­in their bor­ders who want to trans­act in vir­tu­al cur­ren­cies. Ben­jamin Lawsky, the su­per­in­tend­ent of the New York De­part­ment of Fin­an­cial Ser­vices, has floated the idea of re­quir­ing these com­pan­ies to ob­tain a spe­cial­ized “BitLi­cense.” Activ­it­ies like money laun­der­ing re­main il­leg­al, no mat­ter what cur­rency they’re con­duc­ted in.

Manchin’s let­ter comes on the heels of the clos­ure of Ja­pan-based Mt. Gox, which went off­line this week. People who used the ex­change were left un­cer­tain about wheth­er they’d ever see their cur­rency again. Its clos­ure has led to spec­u­la­tion over wheth­er this is a death blow or mere hic­cup for the vir­tu­al cur­rency cre­ated by a per­son or people un­der the pseud­onym Satoshi Na­kamoto, which was in­tro­duced in 2009 and has been grow­ing in pop­ular­ity ever since. Bit­coin sup­port­ers say it will eas­ily over­come this mis­step. Oth­ers pre­dict that the fresh un­cer­tainty sur­round­ing the safety of the vir­tu­al cur­rency will lead to its de­mise. And reg­u­lat­ors say they’re still weigh­ing what the ex­change’s prob­lems mean for their path for­ward.

“We are cer­tainly aware of the re­ports con­cern­ing Mt. Gox but have no fur­ther com­ment at this time,” Steve Hudak, a spokes­man for Fin­CEN, said Wed­nes­day.

Sen. Tom Carp­er — who chairs the Home­land Se­cur­ity and Gov­ern­ment­al Af­fairs Com­mit­tee, which held a hear­ing in Novem­ber about vir­tu­al cur­ren­cies — called the Mt. Gox news “dis­turb­ing” in a state­ment Tues­day. The Delaware Demo­crat said his staff was “work­ing closely” with “rel­ev­ant fed­er­al agen­cies” to de­term­ine how to pre­vent a sim­il­ar is­sue in the United States. A com­mit­tee aide said Wed­nes­day that it was too soon to draw form­al con­clu­sions or re­com­mend­a­tions from what happened at Mt. Gox.

Manchin, a West Vir­gin­ia Demo­crat who serves on the Sen­ate Bank­ing Com­mit­tee, has long been skep­tic­al of the di­git­al cur­rency. In 2011, he and Sen. Chuck Schu­mer, D-N.Y., wrote to reg­u­lat­ors to ex­press their con­cerns about the il­li­cit drug trade on the now-de­funct Web portal Silk Road, which was en­abled, they said, by bit­coins.

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Bit­coin ad­voc­ates ar­gue that be­cause trans­ac­tions car­ried out in bit­coin are pub­lished to a pub­lic ledger, they are, in fact, highly trace­able. As proof of that, Patrick Murck, gen­er­al coun­sel for the Bit­coin Found­a­tion, poin­ted in an in­ter­view with Na­tion­al Journ­al last month to the high-pro­file ar­rest of Charlie Shr­em, a former mem­ber of the found­a­tion, for al­legedly con­spir­ing to com­mit money laun­der­ing with bit­coins.

On Wed­nes­day, Manchin said he was con­cerned about the vir­tu­al cur­rency’s volat­ile prices and po­ten­tial to be used for il­li­cit activ­ity. Manchin’s let­ter was ad­dressed to the heads of the Fed­er­al Re­serve, Treas­ury De­part­ment, Of­fice of the Comp­troller of the Cur­rency, Fed­er­al De­pos­it In­sur­ance Cor­por­a­tion, Com­mod­ity Fu­tures Trad­ing Com­mis­sion, and Se­cur­it­ies and Ex­change Com­mis­sion.

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