Bitcoin Hits Record High After Senate Panel Told It's Legal
The cyber-currency was at the center of a Senate panel hearing Monday. Senators are looking into the way Bitcoin was used by the illegal drug marketplace that called itself Silk Road. But even with the scrutiny, Bitcoin investors drove the virtual currency to record highs.
STEVE INSKEEP, HOST:
NPR's business news starts with a bitcoin bonanza.
(SOUNDBITE OF MUSIC)
INSKEEP: OK. yesterday, Bitcoin - that online currency we've been talking about a lot lately - hit a new all time high value when federal officials told members of the Senate Homeland Security Committee that virtual currencies are not illegal.
NPR's Steve Henn has more.
STEVE HENN, BYLINE: Bitcoin is a kind of digital cash that can make online transactions easy, incredibly cheap to process, and sometimes really hard to trace.
So initially, when the Homeland Security Committee and the U.S. Senate began investigating this virtual currency and its use in illegal online marketplaces, like the "Silk Road," Bitcoin investors and evangelists were nervous.
But apprehension gave way to what some might call irrational exuberance when Mythili Raman from the Justice Department's Criminal Division uttered these words.
MYTHILI RAMAN: Virtual currencies in and of themselves are not illegal. We've all recognized that innovation is important.
HENN: With those words the value of a single Bitcoin shot up 25 percent to more than $600, a new record.
But this doesn't mean federal regulators, like Jennifer Shasky at Financial Crimes Enforcement Network or FinCen, are content to let Bitcoin traders run wild or go completely unregulated.
JENNIFER SHASKY: If this payment system is going to survive and be a real player, a significant player in the financial system, regulation both at home and abroad is going to catch up, because it has to.
HENN: Earlier this year, FinCen published regulations to make it clear that any bank or financial institution that was converting Bitcoins into dollars needed to abide by U.S. anti-money laundering rules. Those institutions need to know their customers and report suspicious transactions.
Some suggested moves to regulate Bitcoin could push the biggest exchanges overseas. But Shasky rejects that idea.
SHASKY: I guess I'd say that business is going to leave the U.S. based on perceived or actual regulatory burden, I at least believe that they're going to find that gain short lived. Every country has an interest in protecting its financial system from illicit actors.
HENN: But actually, big Bitcoin investors here in Silicon Valley don't actually want less regulation, they want more, or at least more clearly articulated rules.
JEREMY LU, PARTNER, LIGHTSPEED VENTURES: You know, one of the biggest fears for or entrepreneur is that you start out running a business thinking that you're doing something that is fine, later on find out that, you know, you accidentally foot faulted because rules changed or weren't clear and all of a sudden, you know, your entire business that you've been building is suddenly cast into doubt.
HENN: Jeremy Lu at Lightspeed Ventures believes that Bitcoin could one day compete against the likes of Visa and MasterCard and become a way to move money around the globe for a tiny faction of the price consumers now pay.
Lightspeed recently invested $5 million in a Bitcoin exchange based in China. That exchange is now the biggest in the world.
Steve Henn, NPR News, Silicon Valley. Transcript provided by NPR, Copyright NPR.View this story on npr.org