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US Senate Meets Bitcoin Day 1

Op-ed - US Senate Meets Bitcoin Day 1

With a tremendous build-up heading into yesterday’s hearing, the price of BTC peaked at over 600 USD. At the start of today’s hearing beginning with Senator Tom Carper’s (D-DE) opening statement, the price of Bitcoin dropped quickly to 445USD/BTC yet at the close of the hearing, the price of Bitcoin stood at 620USD/BTC and keeps rising. With two panels and a captivated audience on the Hill and via online around the world, the first US Congressional Hearing on virtual currencies can be viewed as a success.

Senator Carper (D-DE) opened up the hearing with an introduction expressing the committee’s interest in learning more of the benefits and potential risks of virtual currencies. Entitled, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” the hearing started off with the first panel of representatives from the US Government including Jennifer Shasky Calvery (Director, Financial Crimes Enforcement Network U.S. Department of the Treasury), Mythili Raman (Acting Assistant Attorney General, Criminal Division, U.S. Department of Justice), and Edward W. Lowery III (Special Agent in Charge, Criminal Investigative Division, U.S. Secret Service, U.S. Department of Homeland Security).

Jennifer Shasky Calvery of FinCen opened the first panel and expressed the need for smart regulations that minimize risk. Jennifer highlighted that virtual exchanges can fit into the pre-existing regulatory regime in the US. She proceeded to explain that the PATRIOT Act and Bank Secrecy Act have already provided the tools and the platform for FinCen and the US Government to crack down on illicit activity and specifically pointed out that Section 311 of the Patriot Act was used to crack down on Liberty Reserve. As FinCen’s main goal is to crack down on terrorism and money laundering, Jennifer emphasized that innovation comes with obligation and encouraged each business to register with FinCen, put in place AML restrictions, maintain records and provide service reports to FinCen. She specifically emphasized that it is a privilege to be a part of a global financial system. In response to Senator Carper’s question related to keeping businesses in the United States, she discussed how each country has an interest in protecting consumers and investors from fraud.

Mythili Raman Acting Assistant Attorney General, Criminal Division of the US Department of Justice stressed that virtual currency services are not in and of themselves illegal. Mythill expressed that law enforcement must remain vigilant and understand the challenges of anonymity continue to keep up with innovation. Similar to Jennifer Shasky of FinCen, Mythili highlighted that current money laundering and criminal statutes are advanced enough to apply to virtual currencies and that money laundering statutes have been very effective thus far. She expressed the goal to send a message to illicit actors and keep pace with what is to come.

Edward W. Lowery III of the Secret Service concluded the panel to explain that the Secret Service must continue to adapt to changing threats and highlighted current efforts in place to aggressively and strategically investigate based in the confines of existing laws. Edward did recognize that technically gifted investigators are needed to tackle the new developments in the virtual currency space. Edward stated that the Secret Service attacks problems strategically and supports aggressive law enforcement. Chairman Carper concluded the first panel with recognition that the committee has an oversight role and a need to make sure that the current Administration is working in a cohesive and collaborative manner. Chairman Carper’s main question was, “Is it possible to reap the economic benefits of Bitcoin but at the same time clean up the criminal misbehavior that is out there?”

The second panel featured Ernie Allen (President and Chief Executive Officer, The International Centre for Missing & Exploited Children), Patrick Murck (General Counsel, The Bitcoin Foundation, Inc), Jeremy Allaire (Chief Executive Officer, Circle Internet Financial, Inc.) and Jerry Brito (Senior Research Fellow, The Mercatus Center, George Mason University). Ernie Allen began by addressing the quickening pace of innovation and pressed for global cooperation. Ernie stressed the need to ensure that any response from the government is not so draconian in nature. Ernie expressed his concerns relating to anonymity and stated that absolute internet anonymity is a set up for disaster. He emphasized that the committee cannot ignore the misuse of a digital currency but also acknowledged that Bitcoin is a global phenomena.

Patrick Murck from the Bitcoin Foundation discussed the global role of the Bitcoin Foundation. He stressed that Bitcoin increases dignity, liberty and self determination as many people are not banked in the US and abroad. He acknowledged that Bitcoin can be used for illicit purposes but Bitcoin is based on decentralized systems of open ledgers which are open and transparent. He asserted that Bitcoin does NOT pose a threat to the legal community and also stated that the Bitcoin Foundation thanks FinCen and hopes to continue to move forward with an open dialogue. He stated that there is a real need to create on ramps into the traditional financial system to protect the system from abuse. Current obstacles include the current fear of most banks to work with Bitcoin related businesses.

Jeremy Allaire, CEO of Circle followed Patrick Murck and highlighted that digital currency represents one of the most important technological developments of our time.He emphasized that outside of virtual currencies, there are generally high transaction fees and long periods of time between money transfers. Jeremy did stress the need for clearer guidelines as regulatory uncertainty will hold companies back from utilizing Bitcoin. He also noted that we are at another 20 year start of journey of internet development and that the open nature of Bitcoin and its development is a very positive framework. There is still tension regarding the balance between regulation and anonymity, yet Bitcoin offers great potential to lower the fraud risk when conducting payments as Bitcoin reduces risk and increases consumer privacy and is not subject to chargebacks.

Jerry Brito of the Mercatus Institute concluded the panel and began by stating that Digital Currencies are not new. Bitcoin has prospects for enduring value and is the world’s first completely decentralized global currency. Bitcoin makes possible transactions online that are peer to peer without chargebacks and little to no transaction fees. He agreed that there can be an assessment of the risks of emerging technologies but no need for new laws targeted at this specific technology. Jerry specifically highlighted that the US could lose a head start if regulations are slapped on to Bitcoin related businesses. Bitcoin is an open source project and community and currency providing more opportunities for consumers.

The final question of the hearing caused some laughter: “Who is this Satoshi Nakamoto?” Patrick Murck responded that “Satoshi Nakamoto is the pseudonym for this person or group of people who wrote the white paper,” and expressed that who Satoshi is, is largely irrelevant to the Bitcoin project moving forward as more than half the codebase has been written by others by this point. Senator Carper quoted Albert Einstein to conclude the hearing: “In adversity lies opportunity.”

What will come today with the Senate Banking hearing? Tune in at 3pm to see Bitcoin continue to dominate.