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
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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.

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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