Bitcoin is barely regulated — and these congressmen want to keep it that way


Bitcoin industry representatives explain the technology behind the the cryptocurrency at "Bitcoin Demo Day," held in the foyer of the Rayburn House Office Building on Capitol Hill on July 29. (Rebecca Robbins/The Washington Post)

Many technophiles and libertarians already love Bitcoin. If three bitcoin-friendly congressmen have their way, federal lawmakers could, too.

Bitcoin industry representatives descended on Capitol Hill on July 29 to trumpet the cryptocurrency to any staffers who would listen.

Not many, though, were listening. Although a morning briefing on the issue drew several dozen Hill staffers, attendance was sparse at an educational evening tabling event.

Conversation at the evening event buzzed for a few minutes when the three congressmen hosting “Bitcoin Demo Day” stopped by to shake hands and pick up fliers. But for much of the event, bitcoin start-up vendors and entrepreneurs outnumbered their intended audience: curious Hill staffers. As the event wound down in its final half-hour, many of the vendors’ free slap-on bracelets, stickers and keychains were left untaken.

Still, low turnout didn’t quell the upbeat sentiment of the day. While the events were billed as strictly educational, their agenda was clear: to encourage legislators to continue their laissez-faire approach to regulating the virtual currency.

“It’s a good thing we haven't seen Washington standing in the way of digital currencies, and we need to raise the awareness level here so that we don’t pass any well-intended laws that impede the tremendous benefits that [the currencies can bring],” Rep. Jared Polis (D-Colo.) said in an interview at the evening tabling event.

It was a scene that would have been difficult to imagine just five months ago, when the Tokyo-based Mt. Gox, once the world’s largest bitcoin exchange, filed for bankruptcy and said hackers had stolen bitcoins valued at $460 million, leaving users with little recourse. That disaster came on the heels of several arrests of high-profile members of the Bitcoin community on money-laundering charges.

The scandals prompted calls for greater regulation of and even a ban on a decentralized virtual currency designed to keep the government’s hands out of financial transactions. The Bitcoin network allows users to make transactions using pseudonyms, allowing for anonymity not possible with traditional cashless exchanges.

But the resulting regulation was minimal. The Internal Revenue Service said in March that it regards bitcoins as a form of taxable property, not a government-backed currency, a ruling that was greeted with mixed reactions from the currency’s backers. Congress continued a series of optimistic hearings on Bitcoin, and in May, the Federal Election Commission okayed the donation of bitcoins to political committees.

Now, amid a regulatory challenge from New York state this month, the three bitcoin-friendly congressmen who hosted Tuesday’s events are hoping lawmakers keep up their light regulatory touch.

“My interest in it is to just try and make sure that government doesn’t act too soon in such a fashion that curbs the potential for Bitcoin,” Rep. Mick Mulvaney (R-S.C.) said. “Because I see potential for bitcoin as a medium of trade and as a transactional tool, and I'd hate to see the government make decisions early that sort of retard its growth.”

Part of the federal government’s regulatory inaction so far, some suggested, can be attributed to lawmakers’ lack of knowledge about the currency — inaction that the currency’s backers hope to encourage with further education.

“I think a lot of my colleagues know that it exists, and don’t know much more than that,” Rep. Bob Goodlatte (R-Va.) said. Goodlatte said he had personally recently bought some bitcoins and is “just starting to utilize them.”

With the federal government quiet so far, the private sector has increasingly moved to embrace the cryptocurrency. Travel-booking company Expedia, which sent a representative to Tuesday night’s tabling event on the Hill, said last month that it would begin accepting bitcoins for U.S. hotel reservations.

Start-up businesses surrounding the industry have also proliferated. Several of them — payment service provider BitPay, security platform BitGo, and service provider Coinbase — sent representatives to the event.

 

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