Congress starts investigating Bitcoin

August 13, 2013

Sen. Tom Carper (D-Del.) (Charles Dharapak/AP)

Bitcoin, the once-obscure virtual currency, is getting attention from the most mainstream of all institutions: Congress. The chairman of the Senate Committee on Homeland Security, Thomas Carper (D-Del.) and his Republican counterpart Tom Coburn (R-Okla.) have announced plans to begin probing the virtual currency and the regulatory regime that governs it.

The new inquiry was announced in a Monday letter to Homeland Security Secretary Janet Napolitano. "Virtual currencies appear to be an important emerging area," the senators wrote, arguing that the subject "demands a holistic and whole-government approach   to understand and provide a sensible regulatory framework." Similar letters were also sent to the Department of Justice, the Federal Reserve, Department of Treasury, the Securities and Exchanges Commission, the Office of Management and Budget, and the Commodities Futures Trading Commission.

To that end, the Homeland Security Committee is asking the Obama administration to provide details about all of its current "policies, procedures, guidance or advisories" related to virtual currencies and information about "plans or strategies regarding virtual currencies."

Congress isn't the only government institution taking a closer look at the cryptocurrency. Also yesterday, the New York Department of Financial Services announced that it was initiating its own probe of the subject. It subpoenaed 22 companies with a significant role in the Bitcoin economy with an eye to determining whether and how those firms were subject to New York financial regulations.

As more and more regulators become interested in Bitcoin, it could become increasingly difficult for firms to enter the Bitcoin marketplace. Indeed, Congress could play an important rule by establishing a uniform set of federal rules that preempt conflicting state laws and give Bitcoin startups greater certainty about what rules they must follow.

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