Bitcoin has been all the buzz lately leading to substantial price surges on both Chinese and US exchanges. In the wake of the FBI’s shutdown of the Silk Road and a recent surge in the price of Bitcoin the US Senate Committee on Homeland Security and Governmental Affairs is holding a hearing on virtual currencies. With a slew of new companies seeking governmental guidance on how to proceed with their Bitcoin oriented businesses these hearings have become not just inevitable but welcome by many. Late last night Bloomberg broke a story that suggests the hearing will be positive for Bitcoin. Here’s what to watch for at the hearing, which will take place today at 3:00 PM EST and will be available on CSPAN.
US Senate Committee on Homeland Security and Governmental Affairs
The US Senate Committee on Homeland Security and Governmental Affairs is led by Senators Tom Carper (D) from Delaware and Tom Coburn (R) from Oklahoma. Earlier this month Senator Carper issued a positive statement in regard to a decision by the Federal Elections Commission to allow Bitcoin contributions to campaigns.
“This apparent decision by the Federal Election Commission (FEC) underscores what our Committee has recognized for some time: that virtual currencies are not going away. Their emergence has potentially far reaching implications for the federal government and society as a whole. I applaud the FEC for acting quickly to recognize this and develop a thoughtful policy that gives donors and committees rules of the road to utilize this emerging technology. It continues to be my hope that departments and agencies are working together, in a collaborative fashion, to define and consistently treat Bitcoin and other virtual currencies. I expect this decision and other recent developments will be discussed at our Committee’s upcoming hearing, as we dig into what a whole-government approach to this new and unique technology may look like.” – Senator Tom Carper
While Senator Carper’s statement could indicate a favorable outcome for the hearings, Senator Coburn’s position is less clear. Senator Coburn, generally regarded as being very conservative, has yet to issue statements that are clearly indicative of his position on virtual currencies. Earlier this year the committee sent out a joint letter regarding their investigation into virtual currencies.
The hearing, entitled Beyond Silk Road: Potential Risk, Threats, and Promises of Virtual Currencies, will feature two witness panels. The first panel is comprised of US government officials who have been tasked with investigating virtual currencies. The second panel consists of a mix of representatives of organizations with interests directly related to the development and use of virtual currencies.
Panel one will feature witnesses from the U.S. Department of Treasury, Department of Justice, Secret Service and Department of Homeland Security. This is likely to be one of the more interesting and variable aspects of the hearing. While Bitcoin and other virtual currencies are widely regarded as being difficult to regulate, these representatives would be likely candidates for enforcement of future such regulation. For instance, while many may think of presidential guards when the Secret Service is brought up, they actually have a dual mission which includes protecting the nation’s financial infrastructure. Future policies of these organizations are likely shape the future of virtual currencies in the United States as well as abroad.
Many of the people on the second panel are familiar within the Bitcoin community. For instance, Jerry Brito is a long time proponent of Bitcoin and Patrick Murck currently serves as legal counsel for the Bitcoin foundation. Meanwhile Jeremy Allaire’s position as head of Circle will round out the panel by providing a non-Bitcoin centric discussion on virtual currencies. Circle’s creation Ripple has been largely shunned by many in the cryptocurrency community because of it’s centralized release. However, Allaire’s appearance here indicates that Ripple and Circle may have a role to play yet in the virtual currency market. Furthermore, his company’s heavy investment into their own virtual currency could lead to similar approaches by companies looking to transform digital commerce.
The potential wildcard in Panel II lies with Ernie Allen from the International Center For Missing and Exploited children. His statements are likely to shed light on the downsides of difficult to regulate and potentially anonymous digital currencies.
I wouldn’t expect the outcome of this hearing to be entirely positive or negative for Bitcoin, cryptocurrencies, and other virtual currencies. There will be mention and discussion of the dark side of these currencies. Specifically the past use of Bitcoin as a means to exchange illicit goods both in and outside of the United States will be discussed.
Regardless of what the hearing focuses on, the conclusions that the committee reaches will help to guide future US policy regarding Bitcoin and its derivatives. Bitcoin has grown to a point where clarification of the position of the U.S. government and others is needed for future growth. For even the casual user issues like how to declare Bitcoin gains when filing taxes could become much clearer. A clearly defined position by the U.S. government will help businesses and individuals alike when it comes to investing in and using Bitcoin.
After the hearing let me know your take (in the comments) on how they went and what this means for the future of Bitcoin. I may give out millibit tips to best comments so make sure to include a bitcoin address.