Yesterday I watched the entire C-SPAN Senate Committee Homeland Security and Government Affairs – Digital Currencies session on the Internet. The program description is shown next:
Sen. Carper (D-DE) chairs a Senate Homeland Security & Governmental Affairs Committee hearing on digital currencies, such as Bitcoin. Panelists discuss challenges for law enforcement & regulatory agencies & the promises for U.S. & global economies.
Panelists testified on digital currencies, the online decentralized systems that allow people to exchange goods and services without using real money. This session lasted 2 hours and 32 minutes.
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My comments follow:
Update 1: The first 30+ minutes portion of this meeting is from law enforcement emphasizing criminal use of virtual currencies. I think the law enforcement portion should have been at the end after legitimate uses of virtual currencies were presented. With the law enforcement up front, it unfairly paints a negative picture of virtual currencies. It also uses too much time and infringes on a fair use presentations by those advocating the legitimate use of virtual currencies.
Update 2: Now at 36 minutes into the session and not one positive example of virtual currencies have been entered into the public record. Even the Chairman of the Committee is focusing on criminal uses.
Update 3: At 47 minutes 57 seconds the first somewhat positive legitimate use is being mentioned. But again, it’s being presented by law enforcement instead of business people in favor of virtual currencies. However, the first presenter did not mention a single virtual currency example and harped on illegal use which is law enforcement’s droning position on the topic.
Update 4: The Chairman asked the law enforcement witnesses at 50 minutes 20 seconds, how BitCoin might be managed by the current regulations. The Secret Service witness said as long as the regulations are followed, they see no problem in it. The Acting Assistant Attorney General indicated that existing statues are effective in monitoring the activities. The Treasury Department Financial Crimes witness indicated the department would work closely with Congress on any regulatory changes required.
Update 5: At approximately 1 hour the Chairman asked how virtual currencies fit into the tax reporting system to make sure all taxes are collected that are owed to the government. Treasury responded that they are preparing tax guidance to be given to the public to conform to the regulations.
Update 6: At 1:05:00 the Chairman asked about the Deep Web and how it may be making law enforcement more difficult to monitor illicit activities. The Acting Assistant Attorney General indicated their efforts are to let users of the Deep Web know not to conduct illicit activities because their true identities will be discovered and they are not immune to prosecution.
Update 7: At 1:10:00 the Chairman mentioned that some U.S. businesses are considering moving their operations overseas to avoid burdensome U.S. Regulations on virtual currencies. How should that concern be addressed? Treasury said that exit strategy would be short-lived because of the international work being done to protect transactions. Also that Smart Regulations that promote legal transactions while preventing illicit activity would be helpful.
Update 8: At about 1:15:00 closing statements of first panel of witnesses. Treasury recommends : Register with FinCen.gov; Harden processes to protect against money-laundering; and prepare reports for FinCen.gov on suspected activities. Those three actions would help prevent illicit activities with virtual currencies.
Update 9: Panel Two started at about 1:27:00. Virtual currency witnesses including BitCoin are on the panel of four. The opening statements are very informative. The first panel was allotted 75 minutes of time. Now this second panel only had 63 minutes of time and after the four opening statements, only 32 minutes remain for questions and answers. My concerns about time fairness as mentioned in Update 1 are confirmed.
Update 10: At about 2:00:00 the Chairman asked what agreement with the four opening statements could be made with the information given by the first abel and what areas is their disagreement. How to reconcile any differences.
Update 11: At about 2:02:00 the BitCoin witness indicated that there currently is a “chill” in the banking industry towards allowing BitCoin businesses to acquire bank accounts. He recommends those chilling policies be removed to allow virtual currencies to coexist with other forms of legitimate currencies.
Update 12: At about 2:08:00 Jeremy Allaire stated he did not think that virtual currency businesses should be allowed to operate without lots of financial oversight so that problems are avoided. His company startup Circle Internet Financial company is registered with FinCen.gov and seeking State licensing for that business. Part of their corporate policies is to have deep levels of personal identification to avoid problems with anonymity which is a big concern for law enforcement.
Update 13: At about 2:12:00 Jerry Brito said that FinCen.gov doesn’t provide guidance for users of BitCoin and that such guidance would be helpful to avoid legitimate users and businesses from being investigated by law enforcement due to lack of clarity in the law.
Update 14: At about 2:17:30 the Chairman asked each panel member is Consumers have enough protections built in to virtual currencies? Do we need to improve protection for consumers using virtual currencies? Improve privacy for consumers using virtual currencies?
Update 15: At about 2:23:00 BitCoin Foundation General Consul, Patrick Murck, said the current version of BitCoin protocol is 0.9 and should not be used now for high-risk activities nor ready for mass adoption until more layers of the protocol are put in place.
Update 16: At about 2:27:15 the Chairman asked if anyone knew who the creator(s) of BitCoins was, adding does anyone think it was Al Gore? That brought much laughter from the audience. 🙂