Senate Bitcoin Investigation Moves Forward Along With Other Virtual Currencies

James Johnson

Bitcoin and other virtual currencies are being investigated by a high-profile Senate committee.

The agency is not attempting to destroy virtual currencies but rather Tom Coburn (R-Okla.) says virtual currencies seem to "be an important emerging area" and should therefore be monitored and regulated.

Coburn was joined by counterpart Thomas Carper (D-Del.). The lawmakers sent a letter to Homeland Security Secretary Janet Napolitano in which they outlined their concerns with the new form of digital currency.

If you are unfamiliar with Bitcoin, it is a virtual currency that can be sent via computer, tablet, and smartphone devices without oversight from financial institutions. The Bitcoin currency was established in 2009 but came to prominence in 2012 as a result of uncertain economic outlooks in Europe and other countries.

The Senate committee notes that while Bitcoin serves a purpose it is vulnerable to criminal activity and can therefore drastically decline in value. In April, a single Bitcoin was valued at $200. Several months after reaching its peak, Bitcoin currency lost nearly 25 percent of its value after its largest trading market suffered an outage.

Congress is seeking to create a universally accepted set of rules that would preempt state laws that currently conflict with Bitcoin. Congresses federal rules would help better establish startups that enter into the Bitcoin market.

Also investigating Bitcoin and the virtual money economy is the New York Department of Financial Services which has subpoenaed 22 companies involved in the Bitcoin exchange.

The NYDFS is trying to determine if further financial regulation needs to be placed on Bitcoin and other online currencies.

Government agencies are worried that unsupervised exchanges will lead to more Liberty Reserve schemes. That company was shut down and called a "PayPal for Criminals" after it laundered $6 billion.

Do you think virtual money currency exchanges such as Bitcoin need to be properly regulated by the government, or does that defeat their purpose?

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