Senate Hearing on Future of Bitcoin: Legal Tender or Criminal Enterprise?

The U.S. Senate held a hearing on the Internet-based Bitcoin currency on Nov. 18 revealing a U.S. government that is struggling with crafting policy to govern how the virtual currency can be used in the United States.

The Senate Committee on Homeland Security & Government Affairs held a major hearing on Bitcoin and other virtual currencies called, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies.” The Committee also has a video of the proceedings.

Bitcoin has gotten a black eye because criminals and drug dealers have used the currency in an effort to avoid law enforcement and earlier this year U.S. authorities shut down several websites that traded in Bitcoins over this use by criminals.

But recently the Chicago Federal Reserve Bank issued a “primer” on how Bitcoin works that raised the virtual currency’s stock in the world of finance.

François R. Velde, senior economist of the Federal Reserve in Chicago, wrote that bitcoin is a “remarkable conceptual and technical achievement, which may well be used by existing financial institutions.”

Velde went on saying, “The bitcoin protocol provides an elegant solution to the problem of creating a digital currency–i.e., how to regulate its issue, defeat counterfeiting and double-spending, and ensure that it can be conveyed safely–without relying on a single authority.”

Bitcoin recently reached an all time high reaching $300 on the Mt Gox currency exchange website, the highest value its ever achieved.

Unfortunately, this high comes at the same time that an illegal Internet-based drug dealing system calling itself the Silk Road 2.0 was revealed to the public by authorities.

With the release of this criminal enterprise, Senator Tom Carper, Chairman of the Senate Homeland Security and Governmental Affairs Committee, said that our world today reveals the “inescapable reality that technology is dynamic and ever-evolving and that government policy needs to adapt accordingly.”

So, what do you guys think? Are virtual currencies the money of the future, or is it a flash in the pan like so much else in the technology sector?

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  • Lawrence Westlake

    Like a lot of things on the Internet the funny aspect of this Bitcoin nonsense — “funny” in an “Idiocracy” sense — is that when the market for these non-currencies inevitably collapses and their value goes all the way down to zero a lot of the participants actually will be surprised. Tulips, anyone? Cabbage Patch Kids? The Bitcoin market even is more speculative and far less real. It won’t end well.

    • jim_m

      Bitcoin is not a fad toy, nor is it a perishable product. It is a serious attempt to establish an alternative currency.

      It resembles a conventional currency in most respects except that it is not backed by a government. A currency is little more than a substitute for barter, in that regard it is successful as long as people are willing to accept it in exchange for goods or services.

      The proof of whether this concept can work will take some time yet to be seen. Most likely it will fail and fade from prominence but only a fool makes false comparisons and dismisses it out of hand. (then again, we already knew that Larry was an idiot)

      • Commander_Chico

        Agreed. Let’s see where it goes, it should not be banned by governments, but buying bitcoin as an investment is idiotic.

        • http://www.rustedsky.net JLawson

          I wish I’d dropped a hundred or so on it when it first started – there was a guy in Europe who bought $25, and ended up cashing out at $800k+

          http://news.cnet.com/8301-17852_3-57609880-71/man-forgets-he-once-bought-$25-of-bitcoins-now-worth-$848k/#!

          But it was a case of buying and forgetting. There’s been a number of currencies like Beenz and such – usually they end up worthless.

          • Commander_Chico

            Yep, if you’re just gambling.

          • http://www.rustedsky.net JLawson

            Yep. That’s life – you pays your money and you hopes for a pay-out greater than your pay-in.

  • Par4Course

    Government wants to protect its monopoly on the currency supply – which it recklessly inflates to keep the stock market at record highs. If Bitcoin is speculative and collapses, then it will only hurt those who chose to use it. I remember when inflation was in the double-digits under Jimmy Carter, and no one had a choice of currency. Competition is good.

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