US takes a closer look at digital currency

Representatives of Bitcoin's largest lobby group met federal law enforcement and financial agencies this week as United States authorities increased their scrutiny of the controversial digital currency.

Patrick Murck, general counsel for the Bitcoin Foundation, confirmed the group was meeting the Federal Reserve, the FBI, the treasury department, tax officials and members of the secret service.

Unlike traditional currencies, Bitcoin is not backed by a central government — it is created by a computer program.

It can be traded or used to buy goods and services. Authorities have expressed concerns about potential money-laundering abuses and its use in funding illegal activities including drug purchases.

Murck said the agenda of the Washington meeting was to “help regulators, policymakers and law enforcement officials better understand the Bitcoin protocol and ­distributed finance so they can make better decisions and develop new methodologies for identifying and interceding in illicit activity.

“Bitcoin and distributed finance is here to stay and our preferred path forward is a co-operative one, where we all can help ease each other's transition into an inclusive and distributed global financial system."

The meeting comes amid signs of a crackdown on Bitcoin. Earlier this month, the US senate committee on homeland security wrote to Janet Napolitano, the secretary of homeland security, to ask for details of any “plans or strategies regarding virtual currencies and information regarding any ongoing ­initiatives you have engaged in regarding ­virtual currencies and the name of the person most knowledgeable about any such plans, strategies or initiatives".

Also this month, New York's department of financial services sent subpoenas to 22 companies involved with Bitcoin seeking information on their business practices.

The Bitcoin Foundation clashed with California's regulators in July when the state's regulators accused the foundation of being engaged in money transmission without proper authorisation — a charge vigorously denied by the Bitcoin Foundation.

Murck said he hoped the federal meetings would clear up misunderstandings. “We view this as the beginning of a conversation about the appropriate role of government and law enforcement in this emerging space. Our hope is that this is the beginning of an open dialogue between good-faith stakeholders to find common ground and develop public-private partnerships.

“It is refreshing to see US regulators at the federal level take a responsible approach to working with the industry to understand these issues.

“Contrast that with what we are seeing at the state level: regulators seem more interested in rushing to conclusions and tripping over themselves to be first movers, without regard to the unintended consequences for the industry and US policy at the national level." — © Guardian News & Media 2013

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